Exercise 11-11 Make or Buy Decision [LO11-3] Han Products manufactures 33,000 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: Direct materials $3.70 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 12.00 $ 28.00 Total cost per part An outside supplier has offered to sell 33,000 units of part S-6 each year to Han Products for $22 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $83,000. 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: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? (Prepared from a situation suggested by Professor John W. Hardy.) Lone Star Meat Packers is a major processor of beef and other meat products. The company has a large amount of T-bone steak on hand, and it is trying to decide whether to sell the T-bone steaks as they are initially cut or to process them further into filet mignon and the New York cut. If the T-bone steaks are sold as initially cut, the company figures that a 1-pound T-bone steak would yield the following profit: $ 2.40 Selling price ($2.40 per pound) Less joint costs incurred up to the split-off point where T-bone steak can be identified as a separate product 1.30 Profit per pound 1.10 If the company were to further process the T-bone steaks, then cutting one side of a T-bone steak provides the filet mignon and cutting the other side provides the New York cut. One 16-ounce T-bone steak cut in this way will yield one 6-ounce filet mignon and one 8-ounce New York cut; the remaining ounces are waste. It costs $0.14 to further process one T-bone steak into the filet mignon and New York cuts. The filet mignon can be sold for $4.00 per pound, and the New York cut can be sold for $3.00 per pound. Required: 1. What is the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut steaks? 2. Would you recommend that the T-bone steaks be sold as initially cut or processed further? Complete this question by entering your answers in the tabs below. Required 2 Required 1 the financial advantage (disadvantage) of further processing one T-bone steak into filet mignon and New York cut What steaks? (Do not round intermediate calculations. Round your answer to 2 decimal places.) per unit