Katrina Flatt Managerial Accounting: Acct 325 Face to Face Spring 2018 Prof Jeff
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Katrina Flatt
Managerial Accounting: Acct 325 Face to Face Spring 2018 Prof Jefferies - Web BB & Connect
Ch 12 Exercises
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Exercise 12-11 Make or Buy a Component [LO12-3]
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:
An outside supplier has offered to sell 25,000 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 $680,000. 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.)
rev: 11_04_2014_QC_58435
Garrison 15e Recheck 2014-12-31
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Exercise 12-11 Make or Buy a Component [LO12-3]Learning Objective: 12-03 Prepare a make or buy analysis.
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Ch 12 Exercises
instructions | helpExplanation / Answer
RELEVANT COST OF MAKING A B=25000*A Cost per unit Total cost Direct materials $5.70 $142,500 Direct Labor $7.00 $175,000 Variable manufacturing overhead $3.40 $85,000 Total variable Cost $16.10 $402,500 Fixed Cost for making $150,000 (1/3)*18*25000 Total cost of making $955,000 Per Unit cost of making $38.20 RELEVANT COST OF BUYING Purchase cost $49.50 $1,237,500 Less:Annual Rental $680,000 Net cost of buying $557,500 Per unit cost of buying $22.30 b. Amount of Profit increase if suppliers offer accepted $397,500 (955000-557500)
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