Xian Products manufactures 55,000 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 $ 6.00 12.00 5.00 10.50 $33.50 An outside supplier has offered to sell 48,000 units of part S-6 each year to Han Products for $29.50 per part. If Xian Products accepts this offer, the facilities now being used to manufacture part 5-6 could be rented to another company at an annual rental of $104,000. 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 Prev 1 of 2 Next >
Xian Products manufactures 55,000 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 $ 6.00 12.00 5.00 10.50 $33.50 An outside supplier has offered to sell 48,000 units of part S-6 each year to Han Products for $29.50 per part. If Xian Products accepts this offer, the facilities now being used to manufacture part 5-6 could be rented to another company at an annual rental of $104,000. 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 Prev 1 of 2 Next >
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Xian Products manufactures 55,000 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
$ 6.00
12.00
5.00
10.50
$33.50
An outside supplier has offered to sell 48,000 units of part S-6 each year to Han Products for $29.50 per part. If Xian Products
accepts this offer, the facilities now being used to manufacture part 5-6 could be rented to another company at an annual rental
of $104,000. 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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1 of 2
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