Outsourcing Tuff Tach produces pickup truck bumpers that are sold on a wholesale basis to new car retailers. The average bumper sales price is $170. Normal annual sales volume is 540,000 units, which is the company's maximum production capacity. At this capacity, the company's per-unit costs are as follows: Direct material Direct labor Overhead (2/3 is fixed) Total $53.00 (including mounting hardware @ $15 per unit) 17.00 45.00 $115.00 A key component in producing bumpers is the mounting hardware used to attach the bumpers to the vehicles. Birmingham Mechanical has offered to sell Tuff Tach as many mounting units as the company needs for $20 per unit. If Tuff Tach accepts the offer, the released facilities currently used to produce mounting hardware could be used to produce an additional 8,640 bumpers. What alternative is more desirable and by what amount? (Assume that the company is currently operating at its capacity of 540,000 units.) Note: Do not use a negative sign with your answer. Make the units to avoid an incremental cost from purchasing the units of ✔ $ 1,647,200 X

Outsourcing Tuff Tach produces pickup truck bumpers that are sold on a wholesale basis to new car retailers. The average bumper sales price is $170. Normal annual sales volume is 540,000 units, which is the company's maximum production capacity. At this capacity, the company's per-unit costs are as follows: Direct material Direct labor Overhead (2/3 is fixed) Total $53.00 (including mounting hardware @ $15 per unit) 17.00 45.00 $115.00 A key component in producing bumpers is the mounting hardware used to attach the bumpers to the vehicles. Birmingham Mechanical has offered to sell Tuff Tach as many mounting units as the company needs for $20 per unit. If Tuff Tach accepts the offer, the released facilities currently used to produce mounting hardware could be used to produce an additional 8,640 bumpers. What alternative is more desirable and by what amount? (Assume that the company is currently operating at its capacity of 540,000 units.) Note: Do not use a negative sign with your answer. Make the units to avoid an incremental cost from purchasing the units of ✔ $ 1,647,200 X

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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