Problem 2 the Cost of Making Component Q Which Forms Part of Part

question 6

Essay

Problem 2
The cost of making component Q which forms part of product Y is stated as follows:
£
Raw material 4.00
Direct labour 8.00
Variable overhead 6.40
Fixed overhead 9.60
Total absorption cost per unit 28.00
Component Q could be brought from an outside supplier for 20.
b) You are required, assuming that fixed production costs will not change to state whether the company should continue making the component Q or buy it from outside. Explain the costs you use and your reasoning.

---

Definitions:

Roth IRAs

Retirement accounts where contributions are made with after-tax dollars, and qualified withdrawals in the future are tax-free.

Coverdell Education Savings Accounts

A tax-advantaged investment account in the United States designed to encourage savings for future education expenses.

Keoghs

Retirement plans for self-employed individuals and unincorporated businesses, allowing tax-deferred savings for retirement.

Employer-sponsored Retirement Plan

A retirement savings plan provided by an employer to its employees, often with tax advantages for contributions and investment earnings.