Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

HAV, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras. A supplier

HAV, Inc. manufactures digital cameras. Hawkins is considering whether it should outsource production of a part used in the manufacturing of its cameras. A supplier has been identified who can sell the part to HAV at a price of $6.90 per unit.

Currently, 60,000 units of the part were made last year. At this production level, the company incurred $354,000 of total variable direct product costs. Manufacturing overhead increased by $0.10 for each unit produced. Fixed manufacturing overhead costs equaled $50,000.

If the part were purchased from the outside supplier, 75% of the total fixed manufacturing overhead cost would continue, and the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional income from this other product would be $22,000 per year.

Assuming the company will need 50,000 units of the part next year, at what purchase price per unit will HAV be economically indifferent between making and buying the part from the outside supplier? (circle your final answer)

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

Glomont Auditing And Attestation AICPA Released Questions CPA Exam Review 2022

Authors: Glomont, American Institute Of Certified Public Accountants, AICPA

1st Edition

B0BF31GQMC, 979-8353524045

More Books

Students also viewed these Accounting questions