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Use the Information Below to Answer the Following Question(s)

question 33

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Use the information below to answer the following question(s) :
Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:
Use the information below to answer the following question(s) : Traditions Home Accessories Company manufactures pillows using an activity-based costing system to allocate all manufacturing conversion costs. The following information is provided for the month of June:     Each pillow consists of 3 parts; the total direct materials cost per pillow is $8.00. -If the cost to purchase the same pillow from a supplier is $17.00, what should Traditions Home Accessories do to maximize profits? A)  Purchase the pillow from the supplier. B)  Continue to manufacture the pillow. C)  Since the cost to manufacture the pillow is also $17.00, the company would make the same profit whether it bought the pillow or manufactured it. D)  Close down the business.
Each pillow consists of 3 parts; the total direct materials cost per pillow is $8.00.
-If the cost to purchase the same pillow from a supplier is $17.00, what should Traditions Home Accessories do to maximize profits?

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Definitions:

Consumer Preferences

The tastes, preferences, and priorities that individuals have regarding the consumption of goods and services.

Close-Substitute

A product or service that can easily replace another in the consumption preferences of consumers due to its similarity.

Complements

Goods or services that are consumed together because the use of one enhances the value of the other.

Cholesterol

A waxy, fat-like substance found in all cells of the body, necessary for making hormones, vitamin D, and substances that help digest foods, but high levels can lead to health issues.

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