Han Products manufactures 29,000 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 | $ | 5.70 |
Direct labor | 5.00 | |
Variable manufacturing overhead | 3.70 | |
Fixed manufacturing overhead | 9.00 | |
Total cost per part | $ | 23.40 |
An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $43.00 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 $739,400. 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.) |
b. | How much will profits increase or decrease if the outside supplier’s offer is accepted? |
a) Calculate per unit and total relevant cost
Making | Buying | |||
Per unit | Total | Per Unit | Total | |
Direct material | 5.70 | 165300 | ||
Direct labor | 5 | 145000 | ||
Variable manufacturing overhead | 3.70 | 107300 | ||
Fixed manufacturing overhead | 3 | 87000 | ||
Purchase cost | 43 | 1247000 | ||
Total relevant cost | 17.40 | 504600 | 43 | 1247000 |
b) Profit will decrease by (504600+739400-1247000) = -3000
Han Products manufactures 29,000 units of part S-6 each year for use on its production line. At this level of activi...
Han Products manufactures 29,000 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 $ 3.70 Direct labor 12.00 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 9.00 Total cost per part $ 27.00 An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $23 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 29,000 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 $ 3.70 Direct labor 12.00 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 9.00 Total cost per part $ 27.00 An outside supplier has offered to sell 29,000 units of part S-6 each year to Han Products for $23 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 33,000 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: $3.70 Direct Labor: $10.00 Variable manufacturing overhead: $2.30 Fixed manufacturing overhead: $12.00 Total cost per unit: $28.00 An outside supplier has offered to sell 33,000 units of part S-6 each year to Han Products for $22 per part. If Han Products accepts this offer, the facilities now being used...
Han Products manufactures 23,000 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 $ 3.70 Direct labor 11.00 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 9.00 Total cost per part $ 26.00 An outside supplier has offered to sell 23,000 units of part S-6 each year to Han Products for $22 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 16,000 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 $ 4.10 Direct labor 6.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 15.00 Total cost per part $ 27.60 An outside supplier has offered to sell 16,000 units of part S-6 each year to Han Products for $43.00 per part. If Han Products accepts this offer, the...
Han Products manufactures 24,000 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 $ 3.80 Direct labor 12.00 Variable manufacturing overhead 2.20 Fixed manufacturing overhead 12.00 Total cost per part $ 30.00 An outside supplier has offered to sell 24,000 units of part S-6 each year to Han Products for $24 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 35,000 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 $ 3.90 Direct labor 12.00 Variable manufacturing overhead 2.10 Fixed manufacturing overhead 9.00 Total cost per part $ 27.00 An outside supplier has offered to sell 35,000 units of part S-6 each year to Han Products for $23 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 31,000 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 $ 3.50 Direct labor 8.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 6.00 Total cost per part $ 20.00 An outside supplier has offered to sell 31,000 units of part S-6 each year to Han Products for $18 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 20,000 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$3.40 Direct labor 8.00 Variable manufacturing overhead 2.60 Fixed manufacturing overhead 9.00 Total cost per part $23.00 An outside supplier has offered to sell 20,000 units of part S-6 each year to Han Products for $19 per part. If Han Products accepts this offer, the facilities now being used to...
Han Products manufactures 30,000 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 $ 3.60 Direct labor 10.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 9.00 Total cost per part $ 25.00 An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the...