Question
Supler Corporation produces a part used in the manufacture of one of its products. The unit cost of the product is $21, calculated as follows:
Supler Corporation produces a part used in the manufacture of one of its products. The unit cost of the product is $21, calculated as follows:
Direct materials | ps | 8 | |
Direct labour | 7 | ||
Variable manufacturing overhead | 2 | ||
Fixed manufacturing costs | 4 | ||
unit cost of product | ps | 21 | |
An outside vendor has offered to provide the annual requirement of 4,400 parts for only $10 each. The company estimates that 50% of the aforementioned fixed manufacturing overhead costs could be eliminated if parts are purchased from an outside vendor. Assume that direct labor is an avoidable cost in this decision. Based on these data, the economic advantage (disadvantage) of purchasing the parts from the external supplier would be ?
Step by Step Solution
There are 3 Steps involved in it
Step: 1
The total cost of producing 4400 parts using Supler Corporations current method is Total cost Direct ...Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get StartedRecommended Textbook for
Cost Management Measuring Monitoring And Motivating Performance
Authors: Leslie G. Eldenburg, Susan Wolcott, Liang Hsuan Chen, Gail Cook
2nd Canadian Edition
1118168879, 9781118168875
Students also viewed these Accounting questions
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
Question
Answered: 1 week ago
View Answer in SolutionInn App