Xian Products manufactures 35,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials. Direct labour Variable overhead Fixed overhead. Total cost per part $ 4.00 10.00 3.00 19.30 $26.30 An outside supplier has offered to sell 31,000 units of part S 6 each year to Han Products for $23.50 per part. If Xian Products accepts this offer, the facilities now being used to manufacture pârt S-6 could be rented to another company at an annual rental of $88,000. However, Xian Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.) Net dollar disadvantage
Xian Products manufactures 35,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials. Direct labour Variable overhead Fixed overhead. Total cost per part $ 4.00 10.00 3.00 19.30 $26.30 An outside supplier has offered to sell 31,000 units of part S 6 each year to Han Products for $23.50 per part. If Xian Products accepts this offer, the facilities now being used to manufacture pârt S-6 could be rented to another company at an annual rental of $88,000. However, Xian Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier. Required: 1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.) Net dollar disadvantage
Chapter1: Financial Statements And Business Decisions
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Transcribed Image Text:Xian Products manufactures 35,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit
for part S-6 is as follows:
Direct materials.
Direct labour
Variable overhead
Fixed overhead
Total cost per part
$ 4.00
10.00
3.00
19.30
$26.30
An outside supplier has offered to sell 31,000 units of part S 6 each year to Han Products for $23.50 per part. If Xian Products accepts
this offer, the facilities now being used to manufacture pârt S-6 could be rented to another company at an annual rental of $88,000.
However, Xian Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is
purchased from the outside supplier.
Required:
1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to
the nearest whole dollar amount.)
Net dollar disadvantage
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