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Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,600 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 600 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $25,000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,200 per unit, and labor costs would be $350 per unit produced. a. Should Hahn make rather than buy? Hahn should make the components, saving $ 925000 per year as compared to the other decision. (Enter your response rounded to the nearest whole number.)

Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,600 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 600 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $25,000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,200 per unit, and labor costs would be $350 per unit produced. a. Should Hahn make rather than buy? Hahn should make the components, saving $ 925000 per year as compared to the other decision. (Enter your response rounded to the nearest whole number.)

Practical Management Science
Practical Management Science
6th Edition
ISBN:9781337406659
Author:WINSTON, Wayne L.
Publisher:WINSTON, Wayne L.
Chapter2: Introduction To Spreadsheet Modeling
Section: Chapter Questions
Problem 20P: Julie James is opening a lemonade stand. She believes the fixed cost per week of running the stand...
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Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,600 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 600 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $25,000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,200 per unit, and labor costs would be $350 per unit produced. a. Should Hahn make rather than buy? Hahn should make the components, saving $ 925000 per year as compared to the other decision. (Enter your response rounded to the nearest whole number.)
Transcribed Image Text:Hahn Manufacturing purchases a key component of one of its products from a local supplier. The current purchase price is $1,600 per unit. Efforts to standardize parts succeeded to the point that this same component can now be used in five different products. Annual component usage should increase from 150 to 600 units. Management wonders whether it is time to make the component in-house, rather than to continue buying it from the supplier. Fixed costs would increase by about $25,000 per year for the new equipment and tooling needed. The cost of raw materials and variable overhead would be about $1,200 per unit, and labor costs would be $350 per unit produced. a. Should Hahn make rather than buy? Hahn should make the components, saving $ 925000 per year as compared to the other decision. (Enter your response rounded to the nearest whole number.)
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