Aldean Company makes 100,000 units per year of a part called U67 for use in one of its products. Data concerning the unit production costs of the U67 is as follow: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing cost per unit SO.15 0.10 0.13 0.24 S0.62 An outside supplier has offered to sell Aldean Company all of the U67 it requires. I Aldean Company decided to discontinue making the U67, 25% of the above fixed manufacturing overhead costs could be avoided. Required Assume Aldean Company has no alternative use for facilities that are now being used to produce the U67 product. If the outsider offers to sell the U67 for 0.46 each, what would be the financial advantages (disadvantage) of buy 100,000 U67 from the outside supplier? [1] 12) Should Aldean Company Accept this offer ? Why ? Assume Aldean Company could use the facilities that are now being used to produce that U67 to expand production of another product that would yield and additional contribution margin of $10,000 annually. Given this new assumption, what would be the financial advantage (disadvantage) of buying 100,000 U67 from the outside supplidr? [3)

Aldean Company makes 100,000 units per year of a part called U67 for use in one of its products. Data concerning the unit production costs of the U67 is as follow: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total manufacturing cost per unit SO.15 0.10 0.13 0.24 S0.62 An outside supplier has offered to sell Aldean Company all of the U67 it requires. I Aldean Company decided to discontinue making the U67, 25% of the above fixed manufacturing overhead costs could be avoided. Required Assume Aldean Company has no alternative use for facilities that are now being used to produce the U67 product. If the outsider offers to sell the U67 for 0.46 each, what would be the financial advantages (disadvantage) of buy 100,000 U67 from the outside supplier? [1] 12) Should Aldean Company Accept this offer ? Why ? Assume Aldean Company could use the facilities that are now being used to produce that U67 to expand production of another product that would yield and additional contribution margin of $10,000 annually. Given this new assumption, what would be the financial advantage (disadvantage) of buying 100,000 U67 from the outside supplidr? [3)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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