Answered step by step
Verified Expert Solution
Question
1 Approved Answer
2. Han products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per
2. Han products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labor.... Variable Manufacturing overhead. Fixed Manufacturing overhead.. Total cost per part $ 3.60 10.00 2.40 9.00 $ 25.00 An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $ 21 per part. If Han Products accept this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $ 80,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: Prepare computation showing how much profit will increase or decrease if the outside supplier's offer is accepted. (Hint: Fill in below computation, then make decision after taking into account the opportunity cost of space rental, then make the decision of whether to accept supplier's offer or not) Per unit differential Cost Make Buy 30,000 Units Make Buy Cost of purchasing Cost of making: Direct materials Direct labor Variable overhead Fixed overhead Total cost Space Rental (opportunity cost) Total cost, including opportunity cost
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started