Hahn Manufacturing purchases a key component of one of its products from a local supplier. The...
Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $ 1 comma 450 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 700 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $ 40 comma 000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $ 1 comma 000 per unit, and labor costs would be $ 350 per unit produced. a. Should Hahn make rather than buy? Hahn should ▼ buy make the components, saving $ nothing per year as compared to the other decision. (Enter your response rounded to the nearest whole number.)
Homework Answers
Cost that can be incurred from local supplier = number of units procured * cost per unit
= 700 * 1450 = $1,015,000
Cost that can be incurred if it is made in house:
Total cost = Total fixed cost + total variable cost
Total fixed cost = $40,000
Total variables = 1,000 + 350 = $1,350
Total variable cost = 1350 * 700 = $945,000
Total cost = $40,000 + $945,000 = $985,000
As the cost of in house making is less than the cost of local supplier, Hahn can go for inhouse making to save $30,000.
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Hahn Manufacturing purchases a key component of one of its
products from a local supplier. The...
Hahn Manufacturing purchases a key component of one of its products from a local supplier. The...
Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,500 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 850 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $60,000...
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Gelb Company currently manufactures 58,000 units per year of a key component for its manufacturing process....
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Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,500 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 850 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $60,000...
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key component for its manufacturing process. Variable costs are
$5.15 per unit, fixed costs related to making this component are
$89,000 per year, and allocated fixed costs are $63,500 per year.
The allocated fixed costs are unavoidable whether the company makes
or buys this component. The company is considering buying this
component from a supplier for $3.50 per unit.
Calculate the total incremental cost of making 54,500 and buying
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