Jen Company manufactures 20,000 units of part S1 each year for use on its production line. The cost per unit for part S1 follows: DM P9.60 DL 14.00 умон 6.40 FMOH 20.00 Total cost P50.00 An outside supplier has offered to sell units of part S1 each year to Jen Company for P47 per part. If Jen Company accepts this offer, the facilities now being used to manufacture part S1 could be rented to another company at an annual rental of P300,000. However, Jen Company has determined that P12 of the fixed manufacturing overhead being applied to part S1 would continue even if part S1 were purchased from the outside supplier.
Jen Company manufactures 20,000 units of part S1 each year for use on its production line. The cost per unit for part S1 follows: DM P9.60 DL 14.00 умон 6.40 FMOH 20.00 Total cost P50.00 An outside supplier has offered to sell units of part S1 each year to Jen Company for P47 per part. If Jen Company accepts this offer, the facilities now being used to manufacture part S1 could be rented to another company at an annual rental of P300,000. However, Jen Company has determined that P12 of the fixed manufacturing overhead being applied to part S1 would continue even if part S1 were purchased from the outside supplier.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
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Transcribed Image Text:Jen Company manufactures 20,000 units of part S1 each year for use on its production line. The cost per
unit for part S1 follows:
DM
P9.60
DL
14.00
VMOH
FMOH
Total cost
6.40
20.00
P50.00
An outside supplier has offered to sell units of part S1 each year to Jen Company for P47 per part. If Jen
Company accepts this offer, the facilities now being used to manufacture part S1 could be rented to
another company at an annual rental of P300,000. However, Jen Company has determined that P12 of
the fixed manufacturing overhead being applied to part S1 would continue even if part S1 were
purchased from the outside supplier.
Net peso advantage or disadvantage of accepting the outside supplier's offer?
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