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.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Help me do this excercise 13-7. Thank you
![18
Chapter 13
Required:
Which product or products should be sold at the split-off point and which product or nrod
should be processed further? Show computations.
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. At thie
level of activity, the cost per unit for part S-6 is as follows:
$ 3.60
Direct materials
Direct labor.
10.00
2.40
Variable manufacturing overhead.
Fixed manufacturing overhead.
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 13–8 Identification of Relevant Costs [LO1]
Hollings Company sells and delivers office furniture in the Rocky Mountain area.
The costs associated with the acquisition and annual operation of a delivery truck are given
below:
Insurance
$1,600
Licenses.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F5b476393-1d0f-4e3b-ac62-f7050dcdfb0c%2Fdeac28a2-5d21-4c07-9002-286c9d44c5c9%2F5956fmo_processed.jpeg&w=3840&q=75)
Transcribed Image Text:18
Chapter 13
Required:
Which product or products should be sold at the split-off point and which product or nrod
should be processed further? Show computations.
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. At thie
level of activity, the cost per unit for part S-6 is as follows:
$ 3.60
Direct materials
Direct labor.
10.00
2.40
Variable manufacturing overhead.
Fixed manufacturing overhead.
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 13–8 Identification of Relevant Costs [LO1]
Hollings Company sells and delivers office furniture in the Rocky Mountain area.
The costs associated with the acquisition and annual operation of a delivery truck are given
below:
Insurance
$1,600
Licenses.
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