Refer to the preceding exercise. Suppose Vernon Nectars can use the released facilities in another manufacturing activity that makes a contribution to profits of $75,000 or can rent them out for $55,000. Prepare a schedule that compares the four alternative courses of action. Which alternative would yield the lowest net cost?
Preceding exercise
Assume that Vernon Nectars reports the following costs to make 500-ml bottles for its Juice Cocktails:
Another manufacturer offers to sell Vernon Nectars the bottles for $0.25. 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 500-ml bottles. Should Vernon Nectars make or buy the bottles?
