Han Products manufactures 34,000 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 £ 4.00
Direct labour 9.00
Variable overhead 3.00
Fixed overhead 9.00
Total cost per part £ 25.00
An outside supplier has offered to sell 34,000 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 £84,000. However, Han 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:
Prepare computations to show the net advantage or disadvantage of accepting the outside supplier's offer. (Enter all the answers as positive values. Round your per unit answers to 2 decimal place.)
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Time Remaining 1 hour 18 minutes 29 seconds01:18:29
Item 1
Time Remaining 1 hour 18 minutes 29 seconds01:18:29
Han Products manufactures 34,000 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 £ 4.00
Direct labour 9.00
Variable overhead 3.00
Fixed overhead 9.00
Total cost per part £ 25.00
An outside supplier has offered to sell 34,000 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 £84,000. However, Han 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:
Prepare computations to show the net advantage or disadvantage of accepting the outside supplier's offer. (Enter all the answers as positive values. Round your per unit answers to 2 decimal place.)
