Han Products manufactures 25,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part 5-6 ls: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.90 8.00 2.10 6.00 $ 20.00 An outside supplier has offered to sell 25.000 units of part S-6 each year to Han Products for $18 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 $75,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part 5-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Han Products manufactures 25,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part 5-6 ls: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.90 8.00 2.10 6.00 $ 20.00 An outside supplier has offered to sell 25.000 units of part S-6 each year to Han Products for $18 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 $75,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part 5-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
Subject: accounting
Transcribed Image Text:Han Products manufactures 25,000 units of part 5-6 each year for use on its production line. At this level of activity, the cost per unit
for part S-6 Is:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total cost per part
$ 3.90
8.00
2.10
6.00
$ 20.00
An outside supplier has offered to sell 25,000 units of part S-6 each year to Han Products for $18 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 $75,000.
However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue
even if part 5-6 were purchased from the outside supplier.
Required:
What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Transcribed Image Text:Required:
What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Answer is not complete.
Financial advantage
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