Han Products manufactures 24,000 units of part S-6 each year for use on its prod
ID: 2476032 • Letter: H
Question
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 Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 4.10 6.00 2.60 12.00 Total cost per part $24.70 An outside supplier has offered to sell 24,000 units of part S-6 each year to Han Products for $47.50 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 $750,200. 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 purc hased 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 24.000 Units Make Buy Make LI Cost of purchasing Cost of making Direct materials Direct labor Variable overhead Fixed overhead 4.10 6.00 2.60 4.00 Total cost $ 16.70$ 0.00 $ O $Explanation / Answer
Answer:a The costs that are relevant in a make-or-buy decision are those costs that can be avoided as a result of purchasing from the outside. The analysis for this exercise is:
Answer:b 1140000-(400800+750200)
=11000 increase for buying
Particulars Per unit Differential Costs 24000 units Make Buy Make Buy Cost of Purchasing 47.5 1140000 Cost of making: Direct materials 4.1 98400 Direct labor 6 144000 Variable overhead 2.6 62400 Fixed overhead 4 96000 Total costs 16.7 47.5 400800 1140000Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.