EXERCISE 13-7 Make or Buy a Component [LO3] Han Products manufactures 30,000 units of part S-6 each year for use on its production line Atk: level of activity, the cost per unit for part S-6 is as follows: Direct materials $ 3.60 ... 10.00 Direct labor. .. Variable manufacturing overhead. Fixed manufacturing overhead. 2.40 .... . 9.00 ..... .... Total cost per part.. . . . . $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.

EXERCISE 13-7 Make or Buy a Component [LO3] Han Products manufactures 30,000 units of part S-6 each year for use on its production line Atk: level of activity, the cost per unit for part S-6 is as follows: Direct materials $ 3.60 ... 10.00 Direct labor. .. Variable manufacturing overhead. Fixed manufacturing overhead. 2.40 .... . 9.00 ..... .... Total cost per part.. . . . . $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.

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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