e Con Took Help 060 CH 12 HOMEWORK EX 12-11 FALL 20 Help Save & Ex Han Products

Question

e Con Took Help 060 CH 12 HOMEWORK EX 12-11 FALL 20 Help Save & Ex Han Products manufactures 26,000 units of part $-6 each year for use on its production line At thes level of actvity, the cost per unt for part S-6 bireat materiala Direat labor Variable manufacturing orerhead S 4.00 9.00 2.00 Fixed manutacturing ovethead 9.00 Total eost per part 524.00 An outside suppter has offered to thes offer, the facities now being used to manufacture However, Han Products has determined that two-thirds of the even it part s-6 were purchased from the outside supplier part S-6 could be rented to another company at an annual rentai of $76,ooo fixed manufacturning overhead being applied to part S-6 would continue Required: what is the financial advantage (osadvantage) of accepting the outside suppher's offer? Prev lot 1 Next TOSHIBA NS

Explanation / Answer

Saving if purchased from outside market is $24000.

Since 2/3rd of fixed overhead is unavoidable,therefore not relevant.

Make Amt Buy Amt Direct Material              4.00 Cost of Purchase         20.00 Direct Labor              9.00 Income Per Unit (76000/26000)         (2.92) Variable Overhead              2.00 Relevant Fixed Cost (9 x 1/3)              3.00 Total Cost            18.00         17.08 Savings (18-17.08) x 26000 24000

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