Question
Exercise 13-11 (Algo) Make or Buy Decision [LO13-3] Han Products manufactures 36,000 units of part S-6 each year for use on its production line. At
Exercise 13-11 (Algo) Make or Buy Decision [LO13-3]
Han Products manufactures 36,000 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 | $ 4.00 |
|---|---|
| Direct labor | 8.00 |
| Variable manufacturing overhead | 2.00 |
| Fixed manufacturing overhead | 9.00 |
| Total cost per part | $ 23.00 |
An outside supplier has offered to sell 36,000 units of part S-6 each year to Han Products for $19 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 $86,000. 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 suppliers offer?
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Cloud Auditing Best Practices Perform Security And IT Audits Across AWS Azure And GCP By Building Effective Cloud Auditing Plans
Authors: Shinesa Cambric, Michael Ratemo
1st Edition
1803243775, 978-1803243771
