Question

Cost per Unit for part Direct material: $5.40 Direct Labor: $15.00 Variable Overhead: $3.60 Fixed Overhead:...

Cost per Unit for part

Direct material: $5.40
Direct Labor: $15.00
Variable Overhead: $3.60
Fixed Overhead: $13.50
Total: $37.50

Outside supplier will sell 15,000 united for $31.
It is determined 2/3 of the fixed overhead will continue

Required:
Should the company buy the component?
Show Calculations

Business   Accounting   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1
1
Per unit Total 15000 units
Make Buy Make Buy
Direct materials 5.40 81000
Direct labor 15.00 225000
Variable manufacturing overhead 3.60 54000
Fixed overhead avoidable (13.50*1/3) 4.50 67500
Purchase cost 31 465000
Total 427500 465000
Difference in total costs = 465000-427500= $37500
As total cost to make is less than total cost to buy, the company should not buy the component
The company will save $37500 by making the component
0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
Turner Company currently produces a part which has the following per unit cost:   Direct materials $...
Turner Company currently produces a part which has the following per unit cost:   Direct materials $ 8   Direct labor $3   Variable overhead $1   Fixed overhead    $5    ______    $17 Turner Company can buy the part from an outside supplier for $19 per unit. 60% of Turner Company’s fixed overhead would continue if the part is purchased. If the part is not manufactured by Turner, then the plant facilities can be rented for $60,000 per year. Turner Company is...
The unit product cost of a part is as follows: Direct materials $ 13.00 Direct labor...
The unit product cost of a part is as follows: Direct materials $ 13.00 Direct labor 20.00 Variable manufacturing overhead 3.00 Fixed manufacturing overhead 10.00 Unit product cost $ 46.00 The company makes 8,000 units per year of the part. The company has an offer to purchase all the parts it needs for $42.30 a unit. If the company accepts this offer, the space that is freed up can be used to produce another product. The new product would generate...
Haver Company currently produces component RX5 for its sole product. The current cost per unit to...
Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 50,000 units of RX5 follows.   Direct materials $ 5.00   Direct labor 8.00   Overhead 9.00     Total costs per unit 22.00    Direct materials and direct labor are 100% variable. Overhead is 80% fixed. An outside supplier has offered to supply the 50,000 units of RX5 for $18.00 per unit.    Required:    1. Calculate the incremental costs of making and buying component...
Haver Company currently produces component RX5 for its sole product. The current cost per unit to...
Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 62,000 units of RX5 follows. Direct materials $ 5.00 Direct labor 9.00 Overhead 10.00 Total costs per unit 24.00 Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 62,000 units of RX5 for $20.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5. Total Incremental...
Frontier Company makes 13,000 units per year of a part it uses in the products it...
Frontier Company makes 13,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials $ 13.50 Direct labor 21.10 Variable manufacturing overhead 3.30 Fixed manufacturing overhead 11.20 Unit product cost $ 49.10 An outside supplier has offered to sell the company all of these parts it needs for $42.60 a unit. If the company accepts this offer, the facilities now being used to make...
Following are unit costs- Direct Materials: $7.00 Direct Labor: $5.30 Variable Manufacturing overhead: $1.50 Fixed Manufacturing...
Following are unit costs- Direct Materials: $7.00 Direct Labor: $5.30 Variable Manufacturing overhead: $1.50 Fixed Manufacturing Overhead: $5.90 Variable Selling Expenses: $2.10 Fixed Selling Expenses: $3.40 Normal Selling price is $30 per unit. A Special order of $20 per unit is received for 10,000 unites It would not affect normal sales. Required: Should the order be accepted? Show Calculations
Exercise 10-11 Make or Buy a Component [LO10-3] Han Products manufactures 27,000 units of part S-6...
Exercise 10-11 Make or Buy a Component [LO10-3] Han Products manufactures 27,000 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 $ 4.40   Direct labor 7.00   Variable manufacturing overhead 2.70   Fixed manufacturing overhead 15.00   Total cost per part $ 29.10     An outside supplier has offered to sell 27,000 units of part S-6 each year to Han Products for $44.00 per...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50...
Selling price per unit (package of 2 CDs)...................................... $27.00 Variable costs per unit: Direct material............................................................................................................... $5.50 Direct labor...................................................................................................................... $6.00 Artist's royalties.............................................................................................................. $5.00 Manufacturing overhead.......................................................................................... $3.50 Selling expenses............................................................................................................ $2.50 Total variable costs per unit............................................................ $22.50 Annual fixed costs: Manufacturing overhead.......................................................................................... $192,000 Selling and administrative....................................................................................... $276,000 Total fixed costs................................................................................ $468,000 Forecasted annual sales volume (120,000 units)......................... $3,240,000 Management estimates that direct-labor costs will increase by 8% next year. How many units will the company have to sell next year to reach its...
1. Direct materials were $3 per unit, Direct labor was $2 per unit, variable overhead was...
1. Direct materials were $3 per unit, Direct labor was $2 per unit, variable overhead was $1. Fixed costs were $1000. On a piece of scrap paper do a flexible budget for 1000 and 1500 units. Budgeted variable overhead for 1000 units is Total cost for 1000 units is Total costs for 1500 units is Direct labor for 1500 units is A. 1000 B. some other number C. $10,000 D. $7000 E. $3000
Exercise 12-11 Make or Buy Decision [LO12-3] Han Products manufactures 30,000 units of part S-6 each...
Exercise 12-11 Make or Buy Decision [LO12-3] 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...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT