Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

Pitkin Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as

Pitkin Company produces a part used in the manufacture of one of its products. The unit product cost of the part is $33, computed as follows:

Direct materials

$12

Direct labour

8

Variable manufacturing overhead

3

Fixed manufacturing overhead

10

Unit product cost

$33

An outside supplier has offered to provide the annual requirement of 10,000 of the parts for only $27 each. The company estimates that 30% of the fixed manufacturing overhead costs above will continue if the parts are purchased from the outside supplier. Assume that direct labour is an avoidable cost in this decision. Based on these data, the per unit dollar advantage or disadvantage of purchasing the parts from the outside supplier would be:

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

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

Accounting Principles Volume 1

Authors: Jerry J. Weygandt, Donald E. Kieso, Paul D. Kimmel, Barbara Trenholm, Valerie Warren, Lori Novak

8th Canadian Edition

111950242X, 1-119-50242-5, 978-1119502425

More Books

Students also viewed these Accounting questions

Question

Is this really true, or am I just taking it for granted?

Answered: 1 week ago

Question

2. What we can learn from the past

Answered: 1 week ago

Question

2. Develop a good and lasting relationship

Answered: 1 week ago