Han products manufacturing 40,000 units of part S-9 each year for use of its production line. A this level of activity, the cost per unit for part S-9 is given as follows : DM - $4.60; DL - $12; VMOH $3.60; FMOH $6. An outside supplier has offered to sell 40,000 units of part S-9 each year to Han products for $25 per part. If Han products accepts this offer, the facilities now being used to manufacturing part S-9 could be rented to another company at an annual rental of $80,000. However. Han products has determined that 2/3 of FMOH being applied to part S-9 would continue even if part S-9 were purchased from the outside supplier. Requirement: iii1. Calculate how much profit will increase/decrease if the outside supplier’s offer is accepted.
Han products manufacturing 40,000 units of part S-9 each year for use of its production line. A this level of activity, the cost per unit for part S-9 is given as follows : DM - $4.60; DL - $12; VMOH $3.60; FMOH $6. An outside supplier has offered to sell 40,000 units of part S-9 each year to Han products for $25 per part. If Han products accepts this offer, the facilities now being used to manufacturing part S-9 could be rented to another company at an annual rental of $80,000. However. Han products has determined that 2/3 of FMOH being applied to part S-9 would continue even if part S-9 were purchased from the outside supplier. Requirement: iii1. Calculate how much profit will increase/decrease if the outside supplier’s offer is accepted.
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter20: Inventory Management: Economic Order Quantity, Jit, And The Theory Of Constraints
Section: Chapter Questions
Problem 7E: Ottis, Inc., uses 640,000 plastic housing units each year in its production of paper shredders. The...
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Question iii)
Han products manufacturing 40,000 units of part S-9 each year for use of its production line. A this level of activity, the cost per unit for part S-9 is given as follows : DM - $4.60; DL - $12;
VMOH $3.60; FMOH $6.
An outside supplier has offered to sell 40,000 units of part S-9 each year to Han products for $25 per part. If Han products accepts this offer, the facilities now being used to manufacturing part S-9 could be rented to another company at an annual rental of $80,000. However. Han products has determined that 2/3 of FMOH being applied to part S-9 would continue even if part S-9 were purchased from the outside supplier.
Requirement:
iii1. Calculate how much profit will increase/decrease if the outside supplier’s offer is accepted.
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