What is the net advantage (disadvantage) of purchasing the part rather than making it? Ahringer Company makes 50,000 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 P19.10 Direct labor 21.70 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 2.10 14.20 P57.10 An outside supplier has offered to sell the company all of these parts it needs for P50.10 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be P135,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, P9.30 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

What is the net advantage (disadvantage) of purchasing the part rather than making it? Ahringer Company makes 50,000 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 P19.10 Direct labor 21.70 Variable manufacturing overhead Fixed manufacturing overhead Unit product cost 2.10 14.20 P57.10 An outside supplier has offered to sell the company all of these parts it needs for P50.10 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be P135,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, P9.30 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products.

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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