Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Han Products manufactures 30,000 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 30,000 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 $ 5.10
Direct labor 8.00
Variable manufacturing overhead 3.10
Fixed manufacturing overhead 18.00
Total cost per part $ 34.20

An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $47.00 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 $733,000. 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:
a.

Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.)

per unit diff erential cost 30,000 units
------------ make buy make buy
cost of purchasing
cost of making: ----- --------- ------ -----
direct materials
direct labor
variable overhead
fixed overhead
total cost

b. How much will profits increase or decrease if the outside suppliers offer is accepted?

Profit would ____ by ____.

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image_2

Step: 3

blur-text-image_3

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

More Books

Students also viewed these Accounting questions

Question

What are the four fundamental assumptions of free market economics?

Answered: 1 week ago