Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $22, computed as follows:Direct materials$ 7Direct laborVariable manufacturing overheadFixed manufacturing overhead4Unit product cost$22An outside supplier has offered to provide the annual requirement of 4,800 of the parts for only $10 each. The company estimates that 75% of the fixedmanufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in thisdecision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:

financial advantage: $4 per unit on average Explanation: total production cost $22 Direct…

Answered: st nas offered to provide th ead cost…

Business

Accounting

st nas offered to provide th ead cost above couldb

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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Concept explainers

Pricing

Pricing is used as a term in finance and economics, pricing is the process of fixing a value for a product or a service. Pricing establishes a value for a product or service that the customer has to pay. A business can choose from different strategies while deciding to set prices.

Question

Supler Corporation produces a part used in the manufacture of one of its products. The unit product cost is $22, computed as follows:
Direct materials
$ 7
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
4
Unit product cost
$22
An outside supplier has offered to provide the annual requirement of 4,800 of the parts for only $10 each. The company estimates that 75% of the fixed
manufacturing overhead cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this
decision. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:

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