Han Products manufactures 29,000 units of part S-6 each year for use on its prod

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 $44.00 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 $720,600. 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 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:

Explanation / Answer

*Fixed Cost=12*2/3=8 per unit

Rent is income so has been showed wth negative sign.

Make Buy Net Income Cost per unit Total $ Cost per unit Total $ Increase (Decrease) Direct materials              4.20 121,800.00                  -   Direct labor              8.00 232,000.00                  -   Variable overhead costs
54% of Direct Labor              3.40     98,600.00                  -   Fixed manufacturing costs            12.00 348,000.00              8.00      232,000.00 Purchase price            44.00 1,276,000.00 Rent of facility    (720,600.00) Total annual cost            27.60 800,400.00            52.00      787,400.00                 13,000.00

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