Fowler Ltd manufactures a range of products. One type of product is interactive whiteboards for schools and colleges. Data relating to the costs for October 2014 are as follows:
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Direct materials |
30,000 |
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Direct labour |
15,000 |
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Manufacturing overheads: |
Fixed |
5,000 |
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Variable |
7,000 |
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Selling and distribution costs |
Fixed |
15,000 |
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Variable |
2,000 |
The fixed costs are factory specific and are not specially related to the output of whiteboards. Planned output for October is 500 whiteboards. Each whiteboard is sold for £300. A foreign supplier has offered to supply Fowler Ltd with the whiteboards for £150.
(a)Produce financial data which assess the case for discontinuing production and buying in the whiteboards from the foreign supplier.
(b)Outline three factors which would suggest thatFowlerLtd should continue to produce whiteboards regardless of any cost savings that could be made in the short term.
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