Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit $4.50 $1.20 $2.70 $3.00 $2.30 $1.80 Direct materials. Direct labor Variable overhead... Supervisor's salary Depreciation of special equipment. Allocated general overhead. An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.
Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit $4.50 $1.20 $2.70 $3.00 $2.30 $1.80 Direct materials. Direct labor Variable overhead... Supervisor's salary Depreciation of special equipment. Allocated general overhead. An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
1. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.
2.
Should Ran Corporation make the part?
3. What should Ran ignore? Why?
4. What would be the impact on total Net Income if Ran corporation accepted the supplier's offer? Show a negative for a loss, positive for a gain.

Transcribed Image Text:Part E43 is used in one of Ran Corporation's products. The company's Accounting Department
reports the following costs of producing the 12,000 units of the part that are needed every year.
Per Unit
$4.50
$1.20
$2.70
$3.00
$2.30
$1.80
Direct materials.
Direct labor.
Variable overhead...
Supervisor's salary
Depreciation of special equipment.
Allocated general overhead.
An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this
offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can
be avoided. The special equipment used to make the part was purchased many years ago and has
no salvage value or other use. The allocated general overhead represents fixed costs of the entire
company. If the outside supplier's offer were accepted, only $5,000 of these allocated general
overhead costs would be avoided. What is the relevant cost to make the part? State answer in
total dollars NOT per unit and as a positive number.
Expert Solution

This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
This is a popular solution!
Trending now
This is a popular solution!
Step by step
Solved in 2 steps with 2 images

Knowledge Booster
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


Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,

Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,


Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,

Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,

Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON

Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education

Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education