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Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit $4.50 $1.20 $2.70 $3.00 $2.30 $1.80 Direct materials. Direct labor Variable overhead... Supervisor's salary Depreciation of special equipment. Allocated general overhead. An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.

Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit $4.50 $1.20 $2.70 $3.00 $2.30 $1.80 Direct materials. Direct labor Variable overhead... Supervisor's salary Depreciation of special equipment. Allocated general overhead. An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.

Cornerstones of Cost Management (Cornerstones Series)
Cornerstones of Cost Management (Cornerstones Series)
4th Edition
ISBN:9781305970663
Author:Don R. Hansen, Maryanne M. Mowen
Publisher:Don R. Hansen, Maryanne M. Mowen
Chapter2: Basic Cost Management Concepts
Section: Chapter Questions
Problem 21E: Ellerson Company provided the following information for the last calendar year: During the year,...
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1. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number. 2. Should Ran Corporation make the part? 3. What should Ran ignore? Why? 4. What would be the impact on total Net Income if Ran corporation accepted the supplier's offer? Show a negative for a loss, positive for a gain.
Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit $4.50 $1.20 $2.70 $3.00 $2.30 $1.80 Direct materials. Direct labor. Variable overhead... Supervisor's salary Depreciation of special equipment. Allocated general overhead. An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.
Transcribed Image Text:Part E43 is used in one of Ran Corporation's products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit $4.50 $1.20 $2.70 $3.00 $2.30 $1.80 Direct materials. Direct labor. Variable overhead... Supervisor's salary Depreciation of special equipment. Allocated general overhead. An outside supplier has offered to make the part and sell it to the company for $14.70 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $5,000 of these allocated general overhead costs would be avoided. What is the relevant cost to make the part? State answer in total dollars NOT per unit and as a positive number.
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