Maurice Tutor

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Category > Accounting Posted 29 Jul 2017 My Price 11.00

Han Products

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.)
 
 

Per Unit Differential Costs Make

 Per Unit Differential costs buys 25,000 Units Makes 25,000 units buy
Cost of Purchasing        
Cost of Making:        
Direct Material:        
Direct Labor:        
Variable Overhead:        
Fixed Overhead:        
Total Cost        
         
 

     

b. How much will profits increase or decrease if the outside supplierAc€?cs offer is accepted?

Profit would _______ by ___________.

Answers

Maurice Tutor
(5)
Status NEW Posted 29 Jul 2017 10:07 PM My Price 11.00

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