Han Products manufactures 27,000 units of part S-6 each year for use on its prod
ID: 2462823 • Letter: H
Question
Han Products manufactures 27,000 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 27,000 units of part S-6 each year to Han Products for $47.50 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 $790,800. 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.)
Han Products manufactures 27,000 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:
Explanation / Answer
a.
b.
if the company accept outside supplier's order, companies profit will decrease by $653,700-$650,700 = $3,000
Make Meterials 27,000*$5.70 = $153,900 Direct Labour 27,000*$6.00 = $162,000 Overhead Fixed 27,000*$9.00 = $243,000 Variable 27,000*$3.40 = $91,800 Total Costs $153,900+$162,000+$243,000+$91,800 = $650,700 Per unit cost $650,700/27,000 = $24.10 Buy Purchase price 27,000*47.5 = $1,282,500 Fixed Cost 27,000*($9.00/3*2) = $162,000 Less: Rent amount Received from another company -$790,800 Total Cost $1,282,500+$162,000-$790,800 = $653,700 Per unit cost $653,700/27,000 = $24.21Related Questions
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