Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Archer currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price

Archer currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $38.00. Archer currently produces 100,000 subcomponents at the following manufacturing costs:

Per unit
Direct materials $ 11.30
Direct labor 8.60
Variable manufacturing overhead 4.80
Fixed manufacturing overhead 2.90
Unit cost $ 27.60

a. If Archer has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier?

b. If Archer has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier? (Round your answer to 2 decimal places.)

c. Now assume Archer would avoid $540,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier?

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Auditing Beyond Compliance Using The Portable Universal Quality Lean Audit Model

Authors: Janet Bautista Smith

1st Edition

0873898400, 9780873898409

More Books

Students also viewed these Accounting questions