supler company produces part used in manufacture of one of it\'s products. the u

Q: supler company produces part used in manufacture of one of it's products. the u

Make Buy Net income increase/(decrease) Direct Materials 8 0 8 Direct Labor 4 0 4 Variable OH 1 0 1 Fixed OH 5 2 3 Purchase price 0 14 (14) Unit product cost 18 16 2 It would be advantageous to purchase from the supplier. They would save $2 per unit Make Buy Net income increase/(decrease) Direct Materials 8 0 8 Direct Labor 4 0 4 Variable OH 1 0 1 Fixed OH 5 2 3 Purchase price 0 14 (14) Unit product cost 18 16 2

ID: 2387247 • Letter: S

Question

supler company produces part used in manufacture of one of it's products. the unit product cost is $18, computed as follows: direct materials $8, direct labor $4, Variable manufacturing overhead $1, fixed manufacturing overhead $5, unit product cost $18. an outside supplier has offered to provide the annual requirement of 4,00 of the parts for only $14 each. It is estimated that 60 percent of the fixed overhead cost above could be eliminated if the parts are purchased from the outside supplier, based on these data, the per unit dollar advantage or disadvantage f purchasing from the outside supplier would be:

Explanation / Answer

Make

Buy

Net income increase/(decrease)

Direct Materials

Direct Labor

Variable OH

Fixed OH

Purchase price

(14)

Unit product cost

It would be advantageous to purchase from the supplier. They would save $2 per unit