Figure 13-10. Goutam Company Prints a Variety of Publications and Colored Inserts

Essay

Figure 13-10.
Goutam Company prints a variety of publications and colored inserts for newspapers. Currently, Goutam produces its own ink, including a special metallic color. India Inks has offered to supply Goutam with the 25,000 ounces of metallic ink that it needs each year for $1.24 per ounce. Goutam is interested because this is a particularly difficult ink to make. The purchasing department must make special efforts to locate suppliers, the metallic component requires special handling, and, since the metallic ink uses machinery that is also used to make other colors of ink, the machinery must be cleaned very well before every batch of metallic. The accounting department supplied the following unit costs:
*Fixed overhead is applied on the basis of a plantwide rate based on direct labor hours.
-Refer to Figure 13-10.