Assume a company is considering using available space to make 10,000 units of a component part that it has beenbuying from a supplier for a price of $40 per unit. The company's accounting system estimates the following costsof making the part:Per 10,000 UnitsUnitper Year$ 18$ 180,000120,000Direct materialsDirect labor12Variable manufacturing overheadFixed manufacturing overhead, traceable220,000880,000Fixed manufacturing overhead, allocated440,000$ 44$ 440,000Total costOne-half of the traceable fixed manufacturing overhead relates to a supervisor that would have to be hired tooversee production of the part. The remainder of the traceable fixed manufacturing overhead relates todepreciation of equipment that the company already owns. This equipment has 20,000 units of unused capacity, noresale value, and it does wear out through use. The allocated fixed manufacturing overhead relates to generaloverhead costs, such as the plant manager's salary, lighting, heating and cooling costs, and plant insurance costs.What is the financial advantage (disadvantage) of making 10,000 units instead of buying them from the supplier? Assume a company is considering whether to accept or reject a special order opportunity to sell a customer 300units of a slightly customized version of one of its products for $42. The normal selling price of this product is $48per unit. It can fulfill the order using existing manufacturing capacity. The company's accounting system estimatesthe following unit product cost for this product:PerUnitDirect materials$ 18Direct labor12Manufacturing overhead10Total cost$ 40The company estimates that $3 of its manufacturing overhead varies with respect to the number of units produced.The remainder of its overhead is fixed and unaffected by the volume of units produced within the relevant range.Assuming that this decision will have no effect on sales to other customers, what is the financial advantage(disadvantage) of accepting the special order?

Name: Assume a company is considering using available space to make 10,000
Uploaded: 2024-03-20T06:32:49.000Z
Channel: Bartleby
Description: Assume a company is considering using available space to make 10,000 units of a component part that it has beenbuying from a supplier for a price of $40 per unit. The company's accounting system estimates the following costsof making the part:Per 10