Q4 The Portland Company manufactures Part No. 498 for use in its production line. The manufacturing cost per unit for 20,000 units of Part No. 498 is as follows: Direct materials $4 Variable direct manufacturing labor 22 Variable manufacturing overhead 17 Fixed manufacturing overhead allocated 20 Total manufacturing cost per unit $63 The Counter Company has offered to sell 20,000 units of Part No. 498 to Portland for $58 per unit. Portland will make the decision to buy the part from Counter if there is an overall savings of at least $20,000 for Portland. If Portland accepts Counter’s offer, $5 per unit of the fixed manufacturing overhead allocated would be eliminated. Furthermore, Portland has determined that the released facilities could be used to save relevant costs in the manufacture of Part No. 575. For Portland to achieve an overall savings of $20,000, the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No. 575 would be?
Q4
The Portland Company manufactures Part No. 498 for use in its production line. The
Direct materials $4
Variable direct manufacturing labor 22
Variable manufacturing
Fixed manufacturing overhead allocated 20
Total manufacturing cost per unit $63
The Counter Company has offered to sell 20,000 units of Part No. 498 to Portland for $58 per unit. Portland will make the decision to buy the part from Counter if there is an overall savings of at least $20,000 for Portland. If Portland accepts Counter’s offer, $5 per unit of the fixed manufacturing overhead allocated would be eliminated. Furthermore, Portland has determined that the released facilities could be used to save relevant costs in the manufacture of Part No. 575.
For Portland to achieve an overall savings of $20,000, the amount of relevant costs that would have to be saved by using the released facilities in the manufacture of Part No. 575 would be?
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