Question
Hindman Company uses 5,000 units of Part Z each year as a component in the assembly of one of its products. The company is presently
Hindman Company uses 5,000 units of Part Z each year as a component in the assembly of one of its products. The company is presently producing Part Z internally at a total cost of $80,000 as follows:
Direct materials | $18,000 |
Direct labor | $20,000 |
Variable overhead | $12,000 |
Traceable fixed overhead | $10,000 |
Allocated fixed overhead | $20,000 |
Total costs | $80,000 |
An outside supplier has offred to provide Part Z at a price of $13 per unit. What is the relevant cost per unit for Hindman to produce the component? Enter your answer with no dollar sign with use two decimal places.
What is the financial advantage or disadvantage if Johnson purchases the 5,000 units from the supplier instead of making it internally? Enter your answer as a whole number, no dollar signs or decimals.
Advantage or Disadvantage? A or D. Enter your answer as the letter A for advantage and D for disadvantage in caps.
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