Question
Dart Company makes 14,000 units per year of a part it uses in the products it manufactures. The per unit product cost of this part
Dart Company makes 14,000 units per year of a part it uses in the
products it manufactures. The per unit product cost of this part
is shown below:
direct materials ..............$15.00
direct labor ..................16.00
variable overhead .............11.00
fixed overhead ................?????
total .........................$?????
An outside supplier has offered to sell Dart Company 14,000 units
of this part a year for $55.00 per unit. If Dart Company accepts
this offer, the facilities now being used to make this part could
be used to make more units of a product that is in high demand.
The additional contribution margin that could be earned on this
other product would be $64,400 per year.
60% of the fixed overhead would be eliminated if Dart purchases
the part from the outside supplier. The other 40% of the fixed
overhead is allocated and would be still be incurred even if
the part is purchased from the outside supplier.
It has been determined that if Dart Company purchases the part
from the outside supplier their net income would increase by
$33,600.
Calculate the fixed overhead cost per unit related to this part.
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