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Wehner Company is currently manufacturing Part ABS-43, producing 50,900 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 $44.20 Direct labor 9.45 Variable overhead 2.65 Fixed overhead 3.00 Total $59.30 of the total fixed overhead assigned to ABS-43, $11,605 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 $56.14. 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 make the part. This will produce total cost savings of $ 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. per unit

Wehner Company is currently manufacturing Part ABS-43, producing 50,900 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 $44.20 Direct labor 9.45 Variable overhead 2.65 Fixed overhead 3.00 Total $59.30 of the total fixed overhead assigned to ABS-43, $11,605 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 $56.14. 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 make the part. This will produce total cost savings of $ 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. per unit

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 Wehner Company is currently manufacturing Part ABS-43, producing 50,900 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 $44.20 Direct labor 9.45 Variable overhead 2.65 Fixed overhead 3.00 Total $59.30 of the total fixed overhead assigned to ABS-43, $11,605 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 $56.14. 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 make the part. This will produce total cost savings of $ 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. per unit
Transcribed Image Text:Make-or-Buy, Traditional Analysis Wehner Company is currently manufacturing Part ABS-43, producing 50,900 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 $44.20 Direct labor 9.45 Variable overhead 2.65 Fixed overhead 3.00 Total $59.30 of the total fixed overhead assigned to ABS-43, $11,605 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 $56.14. 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 make the part. This will produce total cost savings of $ 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. per unit
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