Han Products manufactures 34,000 units of part S-6 each year foruse on its production line. At this level of activity, the cost perunit for part S-6 is:
Direct materials $ 3.80 Direct labor 11.00 Variable manufacturingoverhead 2.20 Fixed manufacturingoverhead 6.00 Total cost per part $ 23.00
An outside supplier has offered to sell 34,000 units of part S-6each year to Han Products for $21 per part. If Han Products acceptsthis offer, the facilities now being used to manufacture part S-6could be rented to another company at an annual rental of $84,000.However, Han Products has determined that two-thirds of the fixedmanufacturing overhead being applied to part S-6 would continueeven if part S-6 were purchased from the outside supplier.
Required:
What is the financial advantage (disadvantage) of accepting theoutside supplierâs offer?
Han Products manufactures 34,000 units of part S-6 each year foruse on its production line. At this level of activity, the cost perunit for part S-6 is:
| Direct materials | $ | 3.80 |
| Direct labor | 11.00 | |
| Variable manufacturingoverhead | 2.20 | |
| Fixed manufacturingoverhead | 6.00 | |
| Total cost per part | $ | 23.00 |
An outside supplier has offered to sell 34,000 units of part S-6each year to Han Products for $21 per part. If Han Products acceptsthis offer, the facilities now being used to manufacture part S-6could be rented to another company at an annual rental of $84,000.However, Han Products has determined that two-thirds of the fixedmanufacturing overhead being applied to part S-6 would continueeven if part S-6 were purchased from the outside supplier.
Required:
What is the financial advantage (disadvantage) of accepting theoutside supplierâs offer?
Related questions
Han Products manufactures 20,000 units of part S-6 each year foruse on its production line. At this level of activity, the cost perunit for part S-6 is as follows: |
| Direct materials | $5.10 |
| Direct labor | 6.00 |
| Variable manufacturing overhead | 2.50 |
| Fixed manufacturing overhead | 12.00 |
| Total cost per part | $25.60 |
An outside supplier has offered to sell 20,000 units of part S-6each year to Han Products for $48.00 per part. If Han Productsaccepts this offer, the facilities now being used to manufacturepart S-6 could be rented to another company at an annual rental of$613,000. However, Han Products has determined that two-thirds ofthe fixed manufacturing overhead being applied to part S-6 wouldcontinue even if part S-6 were purchased from the outsidesupplier. |
| Required: |
| (a) | What is the total amount of avoidable costs if Han buys the unitsfrom an outside supplier? (Omit the "$" sign in your response.) |
| Total cost | $ |
| (b) | How much will profits increase or decrease if the outsidesupplier's offer is accepted? (Input the amount as positive value. Omit the "$" sign in yourresponse.) |
| Profits would (Click to select)increasedecrease by | $ |
Han Products manufactures 18,000 units of part S-6 each year foruse on its production line. At this level of activity, the cost perunit for part S-6 is: |
| Directmaterials | $ | 4.00 |
| Direct labor | 7.00 | |
| Variablemanufacturing overhead | 4.10 | |
| Fixed manufacturingoverhead | 12.00 | |
| Total cost perpart | $ | 27.10 |
An outside supplier has offered to sell 18,000 units of part S-6each year to Han Products for $48.50 per part. If Han Productsaccepts this offer, the facilities now being used to manufacturepart S-6 could be rented to another company at an annual rental of$544,200. However, Han Products has determined that two-thirds ofthe fixed manufacturing overhead being applied to part S-6 wouldcontinue even if part S-6 were purchased from the outsidesupplier. |
| Required: |
| a. | Calculate the per unit and total relevant cost for buying andmaking the product? (Round your "per unit" answers to 2decimal places.) Per unit diff 18,000 units
How much will profits increase or decrease if the outsidesupplierâs offer is accepted? Profit would: ? By: ? | ||||||||||||||||||||||||||||||||||||||||
Han Products manufactures 29,000 units of part S-6 each year foruse on its production line. At this level of activity, the cost perunit for part S-6 is:
| Directmaterials | $ | 5.50 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Direct labor | 5.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Variablemanufacturing overhead | 2.40 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fixed manufacturingoverhead | 12.00 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total cost perpart | $ | 24.90 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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