13-23 The Reno Company manufactures Part No. 498...

Smaller Manufacturing Co. has offered to sell American 50,000 bearin of $18 per unit. If the offer is accepted, American can terminate its le existing facilities at an annual savings of $150,000. In addition, $4 per uncertain overhead utilized for manufacture of the bearing would be eliminated. ngs at a ase on Required: Using the relevant cost approach, determine if American should make bearings (b) What qualitative factor(s) may affect the decision? the Cost Savings from External Purchase The Reno Company manufactures Part No. 498 for use in its production c cost per unit for 20,000 units of Part No. 498 is as follows: 13-23 cycle. The Direct materials. Direct labor Variable overhead..12 Fixed overhead applie.. 16 $64 The Tray Company has offered to sell 20,000 units of Part No. 498 to Reno for $60 per unit. Reno will make the decision to buy the part from Tray if it produces a net incremental benefit of APPROACHES TO SPECIAL MANAGERIA $25,000 for Reno. If Reno accepts Tray's offer, S9 per unit of the fixed overhead applied would be totally eliminated. Furthermore, Reno has determined that the released facilities could be used to save relevant costs in the manufacture of Part No. 575 Required How much savings must be attained in the production of Part No. 575 in order to produce a net incremental benefit of $25,000? AICPA adapted