Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Han Products manufactures 55,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per

Han Products manufactures 55,000 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 as follows: $ 6.00 Direct materials Direct labour Variable overhead 12.00 5.00 10.50 Fixed overhead Total cost per part $33.50 An outside supplier has offered to sell 48,000 units of part S-6 each year to Han Products for $29.50 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 $104,000. However, Han Products has determined that one-third(1/3) of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Do not round the intermediate calculations. Round your intermediate calculations to two decimal places.) 2. What is the annual rental value at which the company will be indifferent between the two options? (Do not round the intermedlate calculations. Round your intermediate calculations to two decimal places.) Annual rental value

Step by Step Solution

3.46 Rating (162 Votes )

There are 3 Steps involved in it

Step: 1

Answer Financial advantage or disadvantage 61000 Incremental savings Direct m... 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

Step: 3

blur-text-image

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

Cost Management Measuring, Monitoring And Motivating Performance

Authors: Leslie G. Eldenburg, Susan K. Wolcott, Liang Hsuan Chen, Gail Cook

3rd Canadian Edition

978-1-119-1856, 978-1119185697

More Books

Students also viewed these Accounting questions

Question

Describe four different definitions of quality.

Answered: 1 week ago

Question

explain the negativity bias;

Answered: 1 week ago