Chenango Industries uses $14$ units of part JR$63$ each month in the production of radar equipment. The cost of

manufacturing one unit of JR$63$ is the following:

Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials

and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead.

Chenango Industries' annual manufacturing overhead budget is one$-$third variable and two$-$thirds fixed. Scott Supply,

one of Chenango Industries' reliable vendors, has offered to supply part number JR$63$ at a unit price of $$50,000.$

Required:

If Chenango Industries purchases the JR$63$ units from Scott, the capacity Chenango Industries used to manufacture

these parts would be idle. Should Chenango Industries decide to purchase the parts from Scott, the unit cost of JR$63$

would increase $($or decrease$)$ by what amount?

Assume Chenango Industries is able to rent out all its idle capacity for $$80,000$ per month. If Chenango Industries

decides to purchase the $14$ units from Scott Supply, Chenango's monthly cost for JR$63$ would increase $($or decrease$)$

by what amount?

Assume that Chenango Industries does not wish to commit to a rental agreement but could use its idle capacity to

manufacture another product that would contribute $$164,000$ per month. If Chenango's management elects to

manufacture JR$63$ in order to maintain quality control, what is the net amount of Chenango's cost from using the

space to manufacture part JR$63?$

Complete this question by entering your answers in the tabs below.

If Chenango Industries purchases the JR$63$ units from Scott, the capacity Chenango

Industries used to manufacture these parts would be idle. Should Chenango Industries

decide to purchase the parts from Scott, the unit cost of JR$63$ would increase $($or decrease$)$

by what amount?

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