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Homework answers / question archive / Frank manufactures wine barrels and supplies it to wine farms in the Stellenbosh and Franschhoek area

Frank manufactures wine barrels and supplies it to wine farms in the Stellenbosh and Franschhoek area

Accounting

Frank manufactures wine barrels and supplies it to wine farms in the Stellenbosh and Franschhoek area.

Frank is considering the possibility of outsourcing the manufacturing of wine barrels to an outside party, rather than self-manufacturing. Currently, the following information is available:
   
Total manufacturing cost for the manufacturing of one wine barrel R 450 per barrel
Number of wine barrels in inventory   152  
Rand value of wine barrels currently in inventory R 68,400  
Current standing orders for new wine barrels not yet supplied to customers   280 wine barrels
Selling price per wine barrel R 900  
Proposed cost for a wine barrel if supplied by the outsourcer R 400 per barrel
 
Required:
1. What is the total differential cost of outsourcing wine barrels per wine barrel?
   
   

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