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MCS,PHD
Argosy University/ Phoniex University/
Nov-2005 - Oct-2011
Professor
Phoniex University
Oct-2001 - Nov-2016
Han Products manufactures 25,000 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 | $ | 5.20 |
| Direct labor | 8.00 | |
| Variable manufacturing overhead | 3.70 | |
| Fixed manufacturing overhead | 12.00 | |
| Total cost per part | $ | 28.90 |
|
An outside supplier has offered to sell 25,000 units of part S-6 each year to Han Products for $46.00 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 $632,500. 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: |
| a. |
Calculate the per unit and total relevant cost for buying and making the product? (Round your "per unit" answers to 2 decimal places.) |
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| b. | How much will profits increase or decrease if the outside supplierAc€?cs offer is accepted? |
Profit would _______ by ___________.
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