Question
Henkel manufactures 18,000 units of adhesives annually. The breakdown of manufacturing costs per unit is: Cost Component Amount per Unit Direct materials 15 Direct labor
Henkel manufactures 18,000 units of adhesives annually. The breakdown of manufacturing costs per unit is:
| Cost Component | Amount per Unit |
|---|---|
| Direct materials | €15 |
| Direct labor | €20 |
| Variable manufacturing overhead | €10 |
| Fixed manufacturing overhead | €5 |
| Total | €50 |
A deal from Wacker Chemie offers to sell Henkel 18,000 units at €45 per unit. Accepting the offer will reduce fixed overhead by €20,000.
- Perform a differential analysis to determine if Henkel should produce or buy the adhesives.
- Calculate the total cost change if the offer is accepted.
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Accounting Information Systems
Authors: Marshall B. Romney, Paul J. Steinbart
12th edition
132552620, 978-0132552622
