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    This posting addresses buy vs. make decisions for Pepso Co.

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    Pepsi Company purchases 8,000 units of a part that it needs for production of its product. Notification has just been received from the supplier that a price increase will take effect shortly, which will bring the price of each part to $25. Pepsi Company is considering using some idle facilities to produce the part. The production costs to produce the needed 8,000 parts are as follows:
    Direct materials $17,500
    Direct labor 30,000
    Variable factory overhead 14,000
    Fixed factory overhead 33,500
    The idle facilities could also be rented out at an annual rent of $99,000. All the factory overhead costs are avoidable.

    Determine if Pepsi Company should continue to buy the part or produce it in-house.

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    https://brainmass.com/business/management-accounting/details-make-versus-buy-decisions-464430

    Solution Preview

    Pepsi Company purchases 8,000 units of a part that it needs for production of its product. Notification has just been received from the supplier that a price increase will take effect shortly, which will bring the price of each part to $25. Pepsi Company is considering using some idle facilities to produce the part. The production costs to produce the needed ...

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    The solution provides a detailed breakdown of the buy vs. make decision for Pepsi Company.

    $2.19

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