Aholt 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: Alt Tex How would context to se (1-2 sentenc Direct materials Direct labor $11.30 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 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 $264,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $21.90 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. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it? $264,000 ($328,000) $548,000 Mark as

Principles of Accounting Volume 2
19th Edition
ISBN:9781947172609
Author:OpenStax
Publisher:OpenStax
Chapter10: Short-term Decision Making
Section: Chapter Questions
Problem 7PB: Remarkable Enterprises requires four units of part A for every unit of Al that it produces....
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Aholt 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:
Alt Tex
How would
context to se
(1-2 sentenc
Direct materials
Direct labor
$11.30
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 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 $264,000 per year.
If the part were purchased from the outside supplier, all of the direct labor cost of the part
would be avoided. However, $21.90 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. What is
the net total dollar advantage (disadvantage) of purchasing the part rather than making it?
$264,000
($328,000)
$548,000
Mark as
Transcribed Image Text:Aholt 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: Alt Tex How would context to se (1-2 sentenc Direct materials Direct labor $11.30 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 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 $264,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $21.90 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. What is the net total dollar advantage (disadvantage) of purchasing the part rather than making it? $264,000 ($328,000) $548,000 Mark as
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