Homework Help is Here – Start Your Trial Now!
Business
Accounting
Home Centre manulactures 20,000 units of part A-1 each year for use on its production line. At this level of activity, the cost per unit for Part A-1 is as below: Direct materials Direct labour Variable manufacturing overheads Fixed manufacturing overheads Tolal cost per unit $4.80 $7.00 $3.20 $10.00 $25.00 An outside supplier has offered to sell 20,000 units of Part A-1 each year to Home Contre for $ 23.50 per part. If Home Centre accepts this offer, the facilities now being used to manufacture Part A-1 could be rented to another company at an annual rental of $150,000. However, Home Centre has determined that $6 of the fixed manufacturing overhead being applied to Part A-1 would continue even if Part A-1 were purchased from the outside supplier. Required: Using Make or Buy technique, prepare computations showing how much profits will ncrease or decrease if the outside supplier's offer is accepted.

Home Centre manulactures 20,000 units of part A-1 each year for use on its production line. At this level of activity, the cost per unit for Part A-1 is as below: Direct materials Direct labour Variable manufacturing overheads Fixed manufacturing overheads Tolal cost per unit $4.80 $7.00 $3.20 $10.00 $25.00 An outside supplier has offered to sell 20,000 units of Part A-1 each year to Home Contre for $ 23.50 per part. If Home Centre accepts this offer, the facilities now being used to manufacture Part A-1 could be rented to another company at an annual rental of $150,000. However, Home Centre has determined that $6 of the fixed manufacturing overhead being applied to Part A-1 would continue even if Part A-1 were purchased from the outside supplier. Required: Using Make or Buy technique, prepare computations showing how much profits will ncrease or decrease if the outside supplier's offer is accepted.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
See similar textbooks
icon
Related questions
Question

Solve this attachment

Home Centre manulactures 20,000 units of part A-1 each year for use on its production line. At this level of activity, the cost per unit for Part A-1 is as below: Direct materials Direct labour Variable manufacturing overheads Fixed manufacturing overheads Tolal cost per unit $4.80 $7.00 $3.20 $10.00 $25.00 An outside supplier has offered to sell 20,000 units of Part A-1 each year to Home Contre for $ 23.50 per part. If Home Centre accepts this offer, the facilities now being used to manufacture Part A-1 could be rented to another company at an annual rental of $150,000. However, Home Centre has determined that $6 of the fixed manufacturing overhead being applied to Part A-1 would continue even if Part A-1 were purchased from the outside supplier. Required: Using Make or Buy technique, prepare computations showing how much profits will ncrease or decrease if the outside supplier's offer is accepted.
Transcribed Image Text:Home Centre manulactures 20,000 units of part A-1 each year for use on its production line. At this level of activity, the cost per unit for Part A-1 is as below: Direct materials Direct labour Variable manufacturing overheads Fixed manufacturing overheads Tolal cost per unit $4.80 $7.00 $3.20 $10.00 $25.00 An outside supplier has offered to sell 20,000 units of Part A-1 each year to Home Contre for $ 23.50 per part. If Home Centre accepts this offer, the facilities now being used to manufacture Part A-1 could be rented to another company at an annual rental of $150,000. However, Home Centre has determined that $6 of the fixed manufacturing overhead being applied to Part A-1 would continue even if Part A-1 were purchased from the outside supplier. Required: Using Make or Buy technique, prepare computations showing how much profits will ncrease or decrease if the outside supplier's offer is accepted.
Expert Solution
Step 1

Relevant costs are the costs that change as a direct result of a decision taken.

steps

Step by step

Solved in 2 steps with 2 images

Blurred answer
Knowledge Booster
Personal Financial Statements
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.
Recommended textbooks for you
FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
Accounting
ISBN:
9781259964947
Author:
Libby
Publisher:
MCG
Accounting
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education
SEE MORE TEXTBOOKS