1) 2) Han Products manufactures 19,000 units of part S-6 each year for use on it
ID: 2481711 • Letter: 1
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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 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $ 4.60 7.00 2.80 18.00 Total cost per part $32.40 An outside supplier has offered to sell 19,000 units of part S-6 each year to Han Products for $49.50 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 $543,900. 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 19.000 Units Make Buy Make LI Cost of purchasing Cost of making Direct materials Direct labor Variable overhead Fixed overhead Total cost b. How much will profits increase or decrease if the outside supplier's offer is accepted? Profit wouldExplanation / Answer
HAN PRODUCTS 1(a) Calculate the per unit and total relevant cost for buying and making the Product Per Unit Differential cost 19000 units Make Buy Make Buy Cost of Purchasing $ 49.50 $ 940,500.00 Cost of Making Direct Material $ 4.60 $ 87,400.00 Direct Labor $ 7.00 $ 133,000.00 Variable Overhead $ 2.80 $ 53,200.00 Fixed Overhead $ 18.00 $ 12.00 $ 342,000.00 $ 228,000.00 Total cost $ 32.40 $ 61.50 $ 615,600.00 $ 1,168,500.00 Less: Cost save for renting the unit $ 543,900.00 Total cost $ 615,600.00 $ 624,600.00 1(b) Profit will be decreased by $ 9,000.00 if the ouside supplier's offer is accepted. 2 (a) KRISTEN LU Fixed cost includes Depreciation $ 6,410.00 Insurance $ 3,400.00 Garage Rent $ 1,800.00 Automobile Tax and Licence $ 890.00 Total Fixed Cost $ 12,500.00 Total Miles 25000 Fixed Cost per mile $ 0.50 Variable cost per mile $ 0.12 Average cost per mile $ 0.62 2(b) Cost Relevent/Irrelevant cost Variable Operating Cost Relevant Depreciation Irrelevant Automobile Tax Irrelevant Licence Fees Irrelevant Insurance cost Irrelevant Variable Operating cost is relevent for decision making.Depreciation cost is irrelevent because it is a sunk cost & other cost like automobile tax,licence fees Insurance cost are irrelevant because it is that cost whch would be incurred by kristen even it drive the car or rent a car for the trip.
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