Question

JLM Company makes 12,000 units per year of a part it uses in the products it manufactures. The per unit product cost of this part is shown below: direct materials .............. direct labor variable overhead ..... fixed overhead ......... total $15.00 16.00 11.00 ????? $????? An outside supplier has offered to sell JLM Company 12,000 units of this part a year for $55.00 per unit. If JLM Company accepts this offer, the facilities now being used to make this part could be used to make more units of a product that is in high demand. The additional contribution margin that could be earned on this other product would be $34,800 per year. 60% of the fixed overhead would be eliminated if JLM purchases the part from the outside supplier. The other 40% of the fixed overhead is allocated and would be still be incurred even if the part is purchased from the outside supplier. It has been determined that if JLM Company purchases the part from the outside supplier their net income would increase by $30,000. Calculate the fixed overhead cost per unit related to this part.

Answer 1

Solution in Given data; . Direct materials Direct labor 16 variable overhead tet avoidable fixed desheader Naro, relevant cost tomake = (15+ 16+ 11)12000 +X 42 x 12000 + Y - $5000 + levant cost to buy = 12000 X55 -34 800 = $ 625200 Relevant cost to make 625200 + 30000 = $655200 het gelevant const ko make $655200 504000 # * = 655100 x = $151200

Total fixed overhead = $ 151200 604 z 25200D. fixed overhead cost per unit related to this part 252-000 12000 = $ 21 per unit.