Asked on 17 Nov 2017

EXERCISE 12-11 Make or Buy a Component (L012-3] 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 ..................... Direct labor ........................ Variable manufacturing overhead ....... Fixed manufacturing overhead .......... Total cost per part $ 3.60 10.00 2.40 9.00 $25.00 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: Prepare computations showing how much profits will increase or decrease if the outside supplier's offer is accepted.

Answered on 17 Nov 2017

Unlock this answer

Get 1 free homework help answers
Access 3.7 million verified answers.
Get access
Already have an account? Log in