3.00 points Han Products manufactures 16,000 units of part S-6 each year for use

Question

3.00 points Han Products manufactures 16,000 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 S 4.50 7.00 2.80 18.00 Total cost per part $32.30 An outside supplier has offered to sell 16,000 units of part s-6 each year to Han Products for $44.50 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 $398,200. 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 Required: a. Caloulate the per unit and total rolevant cost for buying and making the product? (Round your Per Unit prose answers to 2 decimal places.) Per Unit Differential Costs 16,000 Units Make Buy MakeBuy Cost of purchasing Cost of making Direct materials Direct labor Variable overhead Fixed overhead

Explanation / Answer

1a Per unit 16000 units Make Buy Make Buy Cost of purchasing 44.5 712000 Cost of making: Direct materials 4.5 72000 Direct labor 7 112000 Variable overhead 2.8 44800 Fixed overhead 6 96000 Total cost 20.3 44.5 324800 712000 b Make Buy Total cost 324800 712000 Opportunity cost 398200 Total relevant cost 723000 712000 Profit would increase by $12000(723000-712000)

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