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Han Products manufactures 57,500 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 as follows: Direct materials $ 6.25 Direct labour 12.25 Variable overhead 5.25 Fixed overhead 10.65 Total cost per part $34.40 An outside supplier has offered to sell 50,500 units of part S-6 each year to Han Products for $30.25 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 $106,000. However, Han Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.)

Han Products manufactures 57,500 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 as follows: Direct materials $ 6.25 Direct labour 12.25 Variable overhead 5.25 Fixed overhead 10.65 Total cost per part $34.40 An outside supplier has offered to sell 50,500 units of part S-6 each year to Han Products for $30.25 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 $106,000. However, Han Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.)

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Han Products manufactures 57,500 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 as follows: Direct materials $ 6.25 Direct labour 12.25 Variable overhead 5.25 Fixed overhead 10.65 Total cost per part $34.40 An outside supplier has offered to sell 50,500 units of part S-6 each year to Han Products for $30.25 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 $106,000. However, Han Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.)
Transcribed Image Text:Han Products manufactures 57,500 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 as follows: Direct materials $ 6.25 Direct labour 12.25 Variable overhead 5.25 Fixed overhead 10.65 Total cost per part $34.40 An outside supplier has offered to sell 50,500 units of part S-6 each year to Han Products for $30.25 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 $106,000. However, Han Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.)
2. What is the annual rental value at which the company will be indifferent between the two options? (Round "Total costs" and final answer to the nearest whole dollar amount.) Annual rental value
Transcribed Image Text:2. What is the annual rental value at which the company will be indifferent between the two options? (Round "Total costs" and final answer to the nearest whole dollar amount.) Annual rental value
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