Han Products manufactures 19,000 units of part S-6 each year for use on its prod

Question

Han Products manufactures 19,000 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:

    

   

An outside supplier has offered to sell 19,000 units of part S-6 each year to Han Products for $43.50 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 $443,200. 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 purchased from the outside supplier.

    

Calculate the per unit and total relevant cost for buying and making the product? (Round your Per Unit answers to 2 decimal places.)

        

    

      

Han Products manufactures 19,000 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:

Explanation / Answer

if the company accepted offer from outside company will decrease their profit by 611,300-602,300 = $9,000

Make Meterials 4.6 Direct Labour 5 Overhead Fixed 18 Variable 4.1 Total cost per unit 31.7 Total Cost 602300 Buy Purchase price 19,000*43.50 = $826,500 Fixed Cost (18/3*2)*19,000 = $228,000 Less: Rent amount Received from another company -$443,200 Relevant cost 826,500+228,000-443,200 = 611,300 Relevent cost per unit 611,300/19,000 = $32.17

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