Han Products manufactures 23,000 units of part S-6 each year for use on its prod

Question

Han Products manufactures 23,000 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: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.70 11.00 2.30 9.00 $ 26.00 An outside supplier has offered to sell 23,000 units of part S-6 each year to Han Products for $19 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 $73,000 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.

Explanation / Answer

Differential analysis :

Financial advantage is 96000

Make Buy Direct material 85100 Direct labour 253000 Variable manufacturing overhead 52900 Fixed manufacturing overhead 69000 Opportunity cost 73000 Purchase cost 437000 Total 533000 437000

Related Questions

Navigate

• Browse (All)
• Browse H
• Subjects

---

---

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