Study the information given below and answer the following questions: 4.3.1 Should Scorchers Limited continue to buy the part from the outside supplier or should it produce the part? Motivate your answer with the relevant calculations. (4) 4.3.2 Provide two other factors that are important to this decision. (2)
INFORMATION Scorchers Limited uses a certain part in its manufacturing process that it purchases from an outside supplier at R256 per part including R40 per part for shipping and other purchase related costs. The company estimates that 54 000 of these parts are required next year and is considering making the part Internally. It has sufficient unused capacity to manufacture the 54 000 parts but would need to employ a manager at an annual salary of R432 000 to oversee this production activity. Estimated
production costs (excluding the additional manager’s salary) are as follows: R Direct material 138 Direct labour 60 Variable overheads 30 Fixed overheads (Assumed to be non incremental) 48
Attachments:
Accounting fo….pdf