Question

Han Products manufactures 34,000 units of part S-6 each year for use on its production line....

Han Products manufactures 34,000 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:

Direct materials $ 3.80
Direct labor 11.00
Variable manufacturing overhead 2.20
Fixed manufacturing overhead 6.00
Total cost per part $ 23.00

An outside supplier has offered to sell 34,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $84,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:

What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?

Homework Answers

Answer #1
Net Financial advnatge / Disadvantage
BUY MAKE Net Effect on income
Cost f buying (34000*21) 714000 714000
Cost of Manufacturing
Material (34000*3.80) 129200 -129,200
Labour (34000*11) 374000 -374,000
Variable OH (34000*2.20) 74800 -74,800
Fixed OH (34000*6*1/3) 68000 -68000
Annual rental income -84000 -84000
Net decrease in income 630000 646000 -16,000
Net financial disadvantage of manufacture is ($16000)
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Han Products manufactures 38,000 units of part S-6 each year for use on its production line....
Han Products manufactures 38,000 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: Direct materials $ 3.10 Direct labor 10.00 Variable manufacturing overhead 2.90 Fixed manufacturing overhead 9.00 Total cost per part $ 25.00 An outside supplier has offered to sell 38,000 units of part S-6 each year to Han Products for $19 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 31,000 units of part S-6 each year for use on its production line....
Han Products manufactures 31,000 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: Direct materials $ 3.50 Direct labor 8.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 6.00 Total cost per part $ 20.00 An outside supplier has offered to sell 31,000 units of part S-6 each year to Han Products for $18 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 32,000 units of part S-6 each year for use on its production line....
Han Products manufactures 32,000 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: Direct materials $ 3.60 Direct labor 9.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 6.00 Total cost per part $ 21.00 An outside supplier has offered to sell 32,000 units of part S-6 each year to Han Products for $19 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 31,000 units of part S-6 each year for use on its production line....
Han Products manufactures 31,000 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: Direct materials $ 3.50 Direct labor 8.00 Variable manufacturing overhead 2.50 Fixed manufacturing overhead 6.00 Total cost per part $ 20.00 An outside supplier has offered to sell 31,000 units of part S-6 each year to Han Products for $18 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 30,000 units of part S-6 each year for use on its production line....
Han Products manufactures 30,000 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: Direct materials $ 3.60 Direct labor 10.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 9.00 Total cost per part $ 25.00 An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 26,000 units of part S-6 each year for use on its production line....
Han Products manufactures 26,000 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: Direct materials $ 4.00 Direct labor 9.00 Variable manufacturing overhead 2.00 Fixed manufacturing overhead 9.00 Total cost per part $ 24.00 An outside supplier has offered to sell 26,000 units of part S-6 each year to Han Products for $20 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 22,000 units of part S-6 each year for use on its production line....
Han Products manufactures 22,000 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: Direct materials $ 3.60 Direct labor 10.00 Variable manufacturing overhead 2.40 Fixed manufacturing overhead 6.00 Total cost per part $ 22.00 An outside supplier has offered to sell 22,000 units of part S-6 each year to Han Products for $20 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 33,000 units of part S-6 each year for use on its production line....
Han Products manufactures 33,000 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: Direct materials $ 3.70 Direct labor 10.00 Variable manufacturing overhead 2.30 Fixed manufacturing overhead 12.00 Total cost per part $ 28.00 An outside supplier has offered to sell 33,000 units of part S-6 each year to Han Products for $20 per part. If Han Products accepts this offer, the facilities now...
Han Products manufactures 17,000 units of part S-6 each year for use on its production line....
Han Products manufactures 17,000 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:     Direct materials $ 3.80 Direct labor 6.00 Variable manufacturing overhead 3.60 Fixed manufacturing overhead 12.00 Total cost per part $ 25.40     An outside supplier has offered to sell 17,000 units of part S-6 each year to Han Products for $43.00 per part. If Han Products accepts this offer, the...
Han Products manufactures 30,000 units of part S- 6 each year for use on its production...
Han Products manufactures 30,000 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: Direct materials . . . . . . . . . . . . . . . . . . . . . $ 3.60 Direct labor . . . . . . . . . . . . . . . . . . . . . ....