Han Products manufactures 28,000 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: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.60 11.00 2.40 6.00 $23.00 An outside supplier has offered to sell 28,000 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 for $78,000 per year. However, Han Products determined 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: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Answer is complete but not entirely correct. $ 408,800 X Financial advantage

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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A5

Han Products manufactures 28,000 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 is:
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Total cost per part
$ 3.60
11.00
2.40
6.00
$23.00
An outside supplier has offered to sell 28,000 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 for $78,000 per year. However, Han
Products determined 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:
What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Answer is complete but not entirely correct.
$ 408,800 X
Financial advantage
Transcribed Image Text:Han Products manufactures 28,000 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 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.60 11.00 2.40 6.00 $23.00 An outside supplier has offered to sell 28,000 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 for $78,000 per year. However, Han Products determined 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: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Answer is complete but not entirely correct. $ 408,800 X Financial advantage
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