Han Products manufactures 26,000 units of part S-6 each year for use on its prod
ID: 2566670 • Letter: H
Question
Han Products manufactures 26,000 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 26,000 units of part S-6 each year to Han Products for $38.00 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 $545,400. 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 26,000 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:
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 26,000 Units Make Buy Make Buy 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 would byExplanation / Answer
a Per unit 26000 units Make Buy Make Buy Cost of purchasing 38 988000 Cost of making: Direct materials 5.1 132600 Direct labor 5 130000 Variable overhead 2.5 65000 Fixed overhead 4 104000 Total cost 16.6 38 431600 988000 b Make Buy Total cost 431600 988000 Opportunity cost 545400 Total relevant cost 977000 988000 Profit would decrease bu $11000(988000-977000)
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