Business, 09.04.2020 16:45 awesomegrill
Han Products manufactures 24,000 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 $3.80
Direct labor 12.00
Variable manufacturing overhead 2.20
Fixed manufacturing overhead 12.00
Total cost per part $30.00
An outside supplier has offered to sell 24,000 units of part S-6 each year to Han Products for $22 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 $74,000. 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:
a. What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?
b. Should product X15 be processed further or sold at the split-off point?
Answers: 2
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Han Products manufactures 24,000 units of part S-6 each year for use on its production line. At this...
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