Vehner Company is currently manufacturing Part ABS-43, producing 50,800 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 $47.05 Direct labor 10.00 Wariable overhead 2.75 Fixed overhead 4.25 Total $64.05 of the total fixed overhead assigned to ABS-43, $11,989 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 Vehner for $59.69. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred. Required: .. Should Wehner Company make or buy Part ABS-43? Vehner should buy the part. This will produce total cost savings of $ x.
Vehner Company is currently manufacturing Part ABS-43, producing 50,800 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 $47.05 Direct labor 10.00 Wariable overhead 2.75 Fixed overhead 4.25 Total $64.05 of the total fixed overhead assigned to ABS-43, $11,989 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 Vehner for $59.69. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred. Required: .. Should Wehner Company make or buy Part ABS-43? Vehner should buy the part. This will produce total cost savings of $ x.
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Question
Make-or-Buy, Traditional Analysis
![Make-or-Buy, Traditional Analysis
Wehner
Company is currently manufacturing Part ABS-43, producing 50,800 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
$47.05
Direct labor
10.00
Variable overhead
2.75
Fixed overhead
4.25
Total
$64.05
of the total fixed overhead assigned to ABS-43, $11,989 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 $59.69. 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 buy
the part. This will produce total cost savings of $
X.
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.
X per unit](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fc626f6c0-d2ba-4acf-8a3a-d19ba4dc42e6%2F94748937-0454-4552-ae25-0e3856c8a1e2%2Fls851yo_processed.png&w=3840&q=75)
Transcribed Image Text:Make-or-Buy, Traditional Analysis
Wehner
Company is currently manufacturing Part ABS-43, producing 50,800 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
$47.05
Direct labor
10.00
Variable overhead
2.75
Fixed overhead
4.25
Total
$64.05
of the total fixed overhead assigned to ABS-43, $11,989 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 $59.69. 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 buy
the part. This will produce total cost savings of $
X.
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.
X per unit
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