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.

Question

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.

Quizplus · Accepted Answer

B) Purchase price = 17.00
Manufacture cost = 15.10

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