Han Products manufactures 21.000 units of part S-6 each year for use on its prod

Question

Han Products manufactures 21.000 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 21.000 units of part S-6 each year to Han Products for $49.50 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 $570,700. 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. Required: Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.) How much will profits increase or decrease if the outside supplier's offer is accepted?

Explanation / Answer

Per unit differential         21000 units               costs Make Buy Make Buy Cost of purchasing 49.5 1039500 Direct material 5.7 119700 Direct labor 7 147000 Variable manufacturing overhead 3.1 65100 Fixed manufacturing overhead 18 12 378000 252000 Total cost 33.80 61.50 709800.00 1291500.00 b) Cost when product is bought 1291500.00 Cost when product Is made 709800.00 Incremental cost increase 581700.00 Income from rental 570700.00 Decrease in profit if product is bought 11000.00

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.