$ 3.60 Direct materials ... Direct labor ... Variable manufacturing overhead Fixed manufacturing overhead Total cost per part .. 10.00 2.40 9.00 $25.00
Make or Buy Decision
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:
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
Required:
What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?
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