Question
Han Products manufactures 28,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit
Han Products manufactures 28,000 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 | $ | 5.70 |
Direct labor | 7.00 | |
Variable manufacturing overhead | 4.00 | |
Fixed manufacturing overhead | 12.00 | |
Total cost per part | $ | 28.70 |
An outside supplier has offered to sell 28,000 units of part S-6 each year to Han Products for $49.50 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 $803,400. 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: |
a. | Calculate the per unit and total relevant cost for buying and making the product? Round your unit" answers to 2 decimal places and how much will profits increase or decrease if the outsider supplier is accepted? |
Required: a. Calculate the per unit and total relevant cost for buying and making the product? (Round your "per and making the product? unit" answers to 2 decimal places Per Unit Differential Costs 28,000 Units Make Buy Make Buy Cost of purchasing Cost of making: Direct materials Direct labor Variable overhead Fixed overhead Total cost $ 0.00$ 0.00 $ O S 0 b. How much will profits increase or decrease if the outside supplier's offer is accepted? the outside supplier's offer is
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