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Swing Ltd., manufactures a variety of swing sets for use. The company has always produced all of the necessary parts for its swing sets, including

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Swing Ltd., manufactures a variety of swing sets for use. The company has always produced all of the necessary parts for its swing sets, including all of the hinges. An outside supplier has offered to sell one type of hinge to Swing Ltd, for a cost of KD 35 per unit. To evaluate this offer, Swing Ltd., has gathered the following information relating to its own cost of producing the hinge internally: 18,000 Per Units Unit Per Year Direct materials KD17 KD 306,000 Direct labor 9 162,000 Variable manufacturing overhead 4 72,000 Fixed manufacturing overhead, traceable 2 36,000 (supervisor salary) Fixed manufacturing overhead, allocated 11 198,000 Total cost KD43 KD774,000 Suppose that if the hinges were purchased, Swing Ltd., could use the freed capacity to launch a new product. The segment margin of the new product would be KD 150,000 per year. Additionally, the company could sell its equipment that it uses to produce the parts for KD 20,000. Given this information, what would be the financial advantage (disadvantage) of buying 18,000 hinges from the outside supplier? Required: Calculate the following: Total avoidable cost for making the 18,000 hinges parts = KD The financial advantage (disadvantage) of buying 18,000 hinges from the outside supplier = KD Swing Ltd. should make the hinges. Please answer all parts of the

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