Han Products manufactures 29,000 units of part S-6 each year for use on its prod
ID: 2415214 • Letter: H
Question
Han Products manufactures 29,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:
An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $43.00 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $755,900. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.
Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.)
b.How much will profits increase or decrease if the outside supplier’s offer is accepted?
Direct materials $ 5.50 Direct labor 5.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 12.00 Total cost per part $ 24.90
An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $43.00 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $755,900. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.
Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.)
Per Unit Differential Costs 29,000 Units Make Buy Make Buy Cost of purchasing Cost of making: Direct materials Direct labor Variable overhead Fixed overhead Total costb.How much will profits increase or decrease if the outside supplier’s offer is accepted?
Profit would by
Explanation / Answer
Per Unit Analysis
Total Analysis for 29,000 units
Effect on profit if offer is accepted
Loss on purchase = 1,247,000 - 490,100 = $ 756,900
Income from rent = $ 755,900
Net Loss = $ 1,000
Particulars Make ($) Buy ($) Direct Material 5.50 0 Direct Labor 5 0 Variable 2.40 0 Fixed Avoidable ( 1/3) 4 0 Total Making Cost 16.9 0 Total Buying cost 0 43Related Questions
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