Han Products manufactures 38,000 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 $ 3.10 10.00 2.90 9.00 $ 25.00 An outside supplier has offered to sell 38,000 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 $88,000 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. $ 126,000 Financial advantage

Han Products manufactures 38,000 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 $ 3.10 10.00 2.90 9.00 $ 25.00 An outside supplier has offered to sell 38,000 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 $88,000 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. $ 126,000 Financial advantage

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

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Concept explainers

Manufacturing Costs

Manufacturing cost is the total cost of procuring or producing a product. In other words, the manufacturing cost is the cost that an individual or business owner undertakes for the manufacturing of goods.

Question

Han Products manufactures 38,000 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
$ 3.10
10.00
2.90
9.00
$ 25.00
An outside supplier has offered to sell 38,000 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 $88,000 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.
Financial advantage
$ 126,000

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