Make-or-Buy, Traditional Analysis Wehner Company is currently manufacturing Part ABS-43, producing 52,400 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows: Direct materials $47.30 Direct labor 9.80 Variable overhead 2.60 Fixed overhead 3.90 Total $63.60 Of the total fixed overhead assigned to ABS-43, $12,419 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Wehner for $59.53. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred. Required: 1. Should Wehner Company make or buy Part ABS-43? Wehner should the part. This will produce total cost savings of $fill in the blank 2. 2. What is the maximum amount per unit that Wehner would be willing to pay to an outside supplier? Round your answer to the nearest cent. $fill in the blank 3 per unit
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
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Question Content Area
Make-or-Buy, Traditional Analysis
Wehner Company is currently manufacturing Part ABS-43, producing 52,400 units annually. The part is used in the production of several products made by Wehner. The cost per unit for ABS-43 is as follows:
Direct materials $47.30 Direct labor 9.80 Variable overhead 2.60 Fixed overhead 3.90 Total $63.60 Of the total fixed overhead assigned to ABS-43, $12,419 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part ABS-43), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Wehner for $59.53. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.
Required:
1. Should Wehner Company make or buy Part ABS-43?
Wehner shouldthe part. This will produce total cost savings of $fill in the blank 2.
2. What is the maximum amount per unit that Wehner would be willing to pay to an outside supplier? Round your answer to the nearest cent.
$fill in the blank 3 per unit
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