Assume that Nantucket Nectars reports the following costs to make 17.5 oz.

Assume that Nantucket Nectars reports the following costs to make 17.5 oz.

Assume that Nantucket Nectars reports the following costs to make 17.5 oz. bottles for its Juice

Cocktails:

Nantucket Nectars Company

Cost of Making 17.5-Ounce Bottles

Total Cost for Cost per

1,000,000 Bottles Bottle

Direct materials $ 80,000 $.080

Direct labor 30,000 .030

Variable factory overhead 60,000 .060

Fixed factory overhead 85,000 .085

Total costs $255,000 $.255

Another manufacturer offers to sell Nantucket Nectars the bottles for $.25. The capacity now used to

make bottles will become idle if the company purchases the bottles. Further, one supervisor with a

salary of $60,000, a fixed cost, would be eliminated if the bottles were purchased. Prepare a schedule

that compares the costs to make and buy the 17.5 oz. bottles. Should Nantucket Nectars make or buy

the bottles?

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