Han Products manufactures 32,000 units of part S-6 each year for use on its productionline. At this level of activity, the cost per unit for part S-6 is as follows:Direct materialsDirect labourVariable overheadFixed overheadTotal cost per partAn outside supplier has offered to sell 32,000 units of part S-6 each year to HanProducts for £22 per part. If Han Products accepts this offer, the facilities now beingused to manufacture part S-6 could be rented to another company at an annual rental of£83,000. However, Han Products has determined that two-thirds of the fixed overheadbeing applied to part S-6 would continue even if part S-6 were purchased from theoutside supplier.Required:Prepare computations to show the net advantage or disadvantage of accepting theoutside supplier's offer. (Enter all the answers as positive values. Round your per unitanswers to 2 decimal place.)Cost of purchasingCost of making:Direct materialsDirect labourVariable overheadFixed overheadTotal costRental value of the space (opportunity cost)Total cost, including opportunity costNet£ 3.4011.002.609.00£26.00in favour of buyingPer Unit Differential CostsMakeBuy32,000 UnitsMakeBuy

The differential costs are calculated on the basis of difference in buying and manufacturing a…

an Products manufactures 32,000 units of part S-6 each year for use on its production e. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total cost per part £ 3.40 11.00 2.60 9.00 £26.00 n outside supplier has offered to sell 32,000 units of part S-6 each year to Han roducts for £22 per part. If Han Products accepts this offer, the facilities now being sed to manufacture part S-6 could be rented to another company at an annual rental of 33,000. However, Han Products has determined that two-thirds of the fixed overhead eing applied to part S-6 would continue even if part S-6 were purchased from the utside supplier. equired: repare computations to show the net advantage or disadvantage of accepting the utside supplier's offer. (Enter all the answers as positive values. Round your per unit nswers to 2 decimal place.)

an Products manufactures 32,000 units of part S-6 each year for use on its production e. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total cost per part £ 3.40 11.00 2.60 9.00 £26.00 n outside supplier has offered to sell 32,000 units of part S-6 each year to Han roducts for £22 per part. If Han Products accepts this offer, the facilities now being sed to manufacture part S-6 could be rented to another company at an annual rental of 33,000. However, Han Products has determined that two-thirds of the fixed overhead eing applied to part S-6 would continue even if part S-6 were purchased from the utside supplier. equired: repare computations to show the net advantage or disadvantage of accepting the utside supplier's offer. (Enter all the answers as positive values. Round your per unit nswers to 2 decimal place.)

Principles of Cost Accounting

17th Edition

ISBN:9781305087408

Author:Edward J. Vanderbeck, Maria R. Mitchell

Publisher:Edward J. Vanderbeck, Maria R. Mitchell

Chapter10: Cost Analysis For Management Decision Making

Section: Chapter Questions

Problem 15E

See similar textbooks

Similar questions

Han Products manufactures 30,000 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 $ 3.60 Direct labor 10.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 9.00 An outside supplier has offered to sell 30,000 units of part S–6 each year to Han Products for $21 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 $80,000. 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. Required: What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?
S Han Products manufactures 28,000 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 Total cost per part An outside supplier has offered to sell 28,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company for $78,000 per year. However, Han Products determined 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. $ 3.60 11.00 2.40 6.00 $ 23.00 Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Financial advantage *¨¨¨¨¨¨¨
Erika Company makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials £17.80 Direct labour 19.00 Variable manufacturing overhead 1.00 Fixed manufacturing overhead 17.10 Unit product cost £54.90 An outside supplier has offered to sell the company all of these parts it needs for £48.50 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be £273,000 per year.If the part were purchased from the outside supplier, all of the direct labour cost of the part would be avoided. However, £8.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the…
Alpha Products manufactures 30,000 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 as follows: Direct materials £ 3.60Direct labour 10.00Variable overhead 2.40Fixed overhead 9.00Total cost per part £ 25.00 An outside supplier has offered to sell 30,000 units of part S–6 each year to AlphaProducts for £21 per part. If Alpha 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 £80,000. However, Alpha Products has determined that two-thirds of the fixed overhead being applied to part S-6 would continue even if part S–6 were purchased from the outside supplier Required: (a) Prepare computations to show the net advantage or disadvantage of accepting the outside supplier’s offer. (b) Define the following terms: relevant cost and opportunity cost. (c) ‘If a product line is generating a loss, then that’s pretty good evidence that the…
Specter Company makes 20,000 units per year of a part it uses in the products it manufactures.The unit product cost of this part is computed as follows:Direct materials $25.10Direct labour 18.20Variable manufacturing overhead 2.40Fixed manufacturing overhead 13.40Unit product cost $56.70An outside supplier has offered to sell the company all these parts it needs for $56.00 a unit. Ifthe company accepts this offer, the facilities now being used to make the part could be used tomake more units of a product that is in high demand. The additional contribution margin on thisother product would be $50,000 per year.If the part were purchased from the outside supplier, all the direct labour cost of the part wouldbe avoided. However, $5.10 of the fixed manufacturing overhead cost being applied to the partwould continue even if the part were purchased from the outside supplier. This fixedmanufacturing overhead cost would be applied to the company's remaining products.Required:Part a:Calculate…
Abolt Corporation makes 40,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: direct materials $11.30 direct labour $22.70 variable manufacturing overhead $1.20 fixed manufacturing overhead $24.70 unit product cost $59.90 An outside supplier has offered to sell the company all of these parts it needs for$46.20 a unit. If the company accepts this offer, the facilities now being used tomake the part could be used to make more units of a product that is in highdemand. The additional contribution margin on this other product would be$264,000 per year. Additionally, $21.90 of the fixed manufacturing overheadcost being applied to the part would continue even if the part were purchasedfrom the outside supplier.Required:I. What is the net total dollar advantage (disadvantage) of purchasing the partrather than making it?II. Calculate the maximum amount per unit the company should be willing topay an…
Jordan Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,100 containers follows. Unit-level materials Unit-level labor Unit-level overhead Product-level costs Allocated facility-level costs $ 5,700 6,800 3,900 8,100 27,200 One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Jordan for $2.90 each. Required a. Calculate the total relevant cost. Should Jordan continue to make the containers? b. Jordan could lease the space it currently uses in the manufacturing process. If leasing would produce $12.300 per rhonth, calculate the total avoidable costs. Should Jordan continue to make the containers? a. Total relevant cost Should Jordan continue to make the containers? b. Total avoidable cost Should Jordan continue to make the containers?
Rutro Corp. makes 59,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows:Direct material $21.00 Direct labor 23.00 Variable manufacturing overhead 8.00 Fixed manufacturing overhead 30.00Unit product cost $82.00 An outside supplier has offered to sell the company all of the 59,000 parts it needs for $75.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of another product that is in high demand. The additional contribution margin on this other product would be $310,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, 64% of the fixed manufacturing overhead cost being applied to the part would continue even if the part were…
Ahrends Corporation makes 43,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost $ 12.80 23.30 2.10 26.50 $ 64.70 An outside supplier has offered to sell the company all of these parts it needs for $51.00 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be $301,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $23.40 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.…
Mohave Corp. is considering outsourcing production of ht eumbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce 9600 units per year for 7.00 each. Mohave has the following information about the cost of producing tote bags:Directs materials 3.00Direct Labor 2.00Variable manufacturing overhead 1.00Fixed manufacturing overhead 2.50Total cost per unit 8.50Mohave has deteremined that all variable costs could be eliminated by outsourcing the tote bads, while 75 percent of the fixed overhead cost is unavoidable. At this time, Mohave has no specifif use in mind for the space currently dedicated to producing the tote bags.1.) Compute the difference in cost between making and buying the umbrella tote bag. 2.) Based strictly on the incremental analysis should mohave buy the tote bags or contiunue to make them? 3-a.) Suppose that the space mohave currently uses to make the bags could be utilized by a new product line that would…
Beat Company manufactures 8,000 units of a certain component per year. This component is used in the production of the main product. The following are the costs to make the component per unit: Direct materials $4 Direct labor $4 Variable overhead $3 Fixed overhead $5 If Beat Company buys the component from an outside supplier, the company can rent out the released facilities for P12,360 a year. The cost of the component per unit as quoted by the supplier is P15. 25% of fixed overhead applied in the manufacture of the component will continue regardless of what decision is made. For all purchase made by the company, freight and handling costs are applied at 2% of the purchase price. The direct materials cost presented above is exclusive of such freight and handling cost. What is the advantage or disadvantage of buying the component?A. P12,240 advantage B. 24,600 advantage C. 5,400 disadvantage D. 8,600 advantage
Rundle Electronics currently produces the shipping containers it uses to deliver the electronics products it sells. The monthly cost of producing 9,300 containers follows. Unit-level materials. Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs One-third of these costs can be avoided by purchasing the containers. Russo Container Company has offered to sell comparable containers to Rundle for $2.60 each. Required a. Calculate the total relevant cost. Should Rundle continue to make the containers? b. Rundle could lease the space it currently uses in the manufacturing process. If leasing would produce $11,600 per month, calculate the total avoidable costs. Should Rundle continue to make the containers? Answer is complete but not entirely correct. $ a. Total relevant cost a. Should Rundle continue to make the containers? b. Total avoidable cost b. Should Rundle continue to make the containers? 190.650,000 Yes $24,180,000 $ 5,200 6,100 4,000 7,800…