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(Solution Download) Han Products manufactures 25,000 units of part S-6 each year for use on its production line. At this


 

 

 

 

 

 

 

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 labor8.00
  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 buys25,000 Units Makes25,000 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 ___________.

 

      

 


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