apply relevant cost principles to determine whether seaford should continue to make 598414

Seaford Group produces chocolate products including an exclusive range of chocolate Easter eggs, producing and selling a total of 100,000 eggs each year. The materials cost is $1.25 per egg and the labour cost is $0.70. Additional variable overhead costs are estimated at $0.20 per egg. Fixed overhead costs for Seaford Group total $150,000.

An international company has offered to produce the 100,000 Easter eggs to the same quality on behalf of Seaford for $2.50 per egg. If Seaford accepts this offer it can use its labour to produce other products and its fixed costs can be reduced by $50,000. However, there will be transportation costs that Seaford has to bear to bring the Easter eggs to its premises, amounting to $0.25 per egg.

Apply relevant cost principles to determine whether Seaford should continue to make the Easter eggs in-house or should subcontract to the international company.

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