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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.

FINANCIAL ACCOUNTING
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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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
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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