Exercise 11-11 Make or Buy Decision [LO11-3]Han Products manufactures 20,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unitfor part S-6 is:Direct materials.Direct labor$ 3.408.002.60Variable manufacturing overheadFixed manufacturing overhead9.00$23.00Total cost per partAn outside supplier has offered to sell 20,000 units of part S-6 each year to Han Products for $19 per part. If Han Products accepts thisoffer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $70,000.However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continueeven if part S-6 were purchased from the outside supplier.Required:What is the financial advantage (disadvantage) of accepting the outside supplier's offer?

Make or buy decision: It is the decision made by the company to manufacture the product or buy it…

Answered: What is the financial advantage…

Business

Accounting

What is the financial advantage (disadvantage) of accepting the outside supplier's offer?

Managerial Accounting: The Cornerstone of Business Decision-Making

7th Edition

ISBN:9781337115773

Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger

Chapter11: Performance Evaluation And Decentralization

Section: Chapter Questions

Problem 47P: (Appendix 11A) Cycle Time, Velocity, Conversion Cost The theoretical cycle time for a product is 30...

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es Exercise 11-11 (Algo) Make or Buy Decision [LO11-3] Han Products manufactures 28,000 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 Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.60 11.00 2.40 6.00 $23.00 An outside supplier has offered to sell 28,000 units of part S-6 each year to Han Products for $21 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $78,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?
Exercise 13-11 (Algo) Make or Buy Decision [LO13-3] Han Products manufactures 35,000 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 $ 3.90 Direct labor 12.00 Variable manufacturing overhead 2.10 Fixed manufacturing overhead 9.00 Total cost per part $ 27.00 An outside supplier has offered to sell 35,000 units of part S-6 each year to Han Products for $23 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $85,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier’s offer?
Question 6 Amundsen Company makes 60,000 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 Direct Labor Variable Manufacturing Overhead Fixed Manufacturing Overhead Variable Selling Fixed Selling Total $ 10.10 $17.40 $ 2.70 $15.00 $ 2.75 $ 3.25 $51.20 An outside supplier has offered to sell the company all of these parts it needs. If the company accepts this offer, the facilities now being used to make the part would be idle and fixed manufacturing overhead would be reduced by 80% of current cost. The variable selling costs would be reduced to 40% of current cost. Required: What is the maximum amount the company should be willing to pay an outside supplier per unit for the part?
LL Requlred Information The following information applies to the questions displayed below] Cane Company manufactures two products called Alpha and Beta that sell for $225 and $175, respectively. Each product uses only one type of raw material that costs $6 per pound. The company has the capacity to annually produce 130,000 units of each product Its average cost per unit for each product at this level of activity are given below. Alpha $42 Beta $ 24 32 24 Direct materials Direct labor Variable manufacturing overhead Traceable Fixed manufacturing overhead Variable selling expenses Common fixed expenses 42. 26. 34 31. 34. 27. Total cost per unit $173 The company considers its traceable fixed manufacturing overhead to be avoidable, whereas its common fixed expenses are unavoidable and have been allocated to products based on sales dollars. 2 What is the company's total amount of common fixed expenses? Total common fixed expenses. ( Prev of 15 2 3 4 Next e to search TPL F4 F5
Q – 10: Sohar Company manufactures 10,000 units of a spare part ALFA each year for use on its production line. At this level of activity, the cost per unit for part ALFA is as follows: Direct materials $ 2.40 Direct labor 3.50 Variable manufacturing overhead 1.60 Fixed manufacturing overhead 5.00 Total cost per part $12.50 An outside supplier has offered to sell 15,000 units of spare part ALFA each year to Sohar Company for $11.75 per part. If Sohar Company accepts this offer, the facilities now being used to manufacture ALFA could be rented to another company at an annual rental of $75,000. However, Sohar Company has determined that $3 of the fixed manufacturing overhead being applied to part ALFA would continue even if part ALFA were purchased from the outside supplier. Required: a) Prepare computations showing how much profits will increase or decrease if the outside supplier’s offer is accepted. b) Also mention which cost is opportunity cost…
Homwork Question 6 MSI is considering outsourcing the production of the handheld control module used with some of its products. The company has received a bid from Monte Legend Co. (MLC) to produce 10,000 units of the module per year for $16 each. The following information pertains to MSI’s production of the control modules: Direct materials $9Direct labor $4Variable manufacturing overhead $2Fixed manufacturing overhead $3Total cost per unit $18 MSI has determined that it could eliminate all variable costs if the control modules were produced externally, but none of the fixed overhead is avoidable. At this time, MSI has no specific use in mind for the space that is currently dedicated to the control module production. 1. Compute the difference in cost between making and buying the control module.
Ch 10 Cullumber produces and sells two products—aluminum and vinyl. Each of these products is made in a dedicated manufacturing facility, and the product line managers are evaluated based on the product line’s return on investment. The following data is from the most recent year of operations. Aluminum Vinyl Sales $4,800,000 $4,200,000 Variable costs 2,304,000 2,355,000 Direct fixed costs 1,728,000 1,530,000 Average assets 3,200,000 1,500,000
Question 10.4 Big Machines Corp. has two divisions. Division Y manufactures components that can be sold in the external market place or transferred to Division Z for further processing. The following data relate to Division Y's component product. Variable manufacturing costs/unit $925 Fixed costs/unit at capacity $275 Selling price/unit $1,800 The capacity of the plant is 2,500 units per year. Division Z has offered to purchase 350 units from Division Y at a price of $1,600/unit, which is the market price of the component. The manager of Division Y has refused this offer stating that it would only return a rate of 25.00%, when the divisional target return on sales is 28.00%. The Division Y manager also states that additional fixed costs of $195,000 would be required to produce the 350 units. The corporate required rate of return is 18% of assets and the existing asset base in Division Y is $2,500,000. Required: How many units must Division Y sell in order…
Question 16 Norton's Mufflers manufactures two different product lines, Model X and Model Y. Market demand for Model X is 4,000 per month and demand for Model Y is 5,500 per month. The available machine hours are 20,000 per month for Norton's molding machine, needed for all models. The following per unit data apply: Model X Model Y $80 Selling price Direct materials Direct labor ($10 per hour) $15 Variable support costs ($5 per machine-hour) $10 Fixed support costs $20 $30 How many units of Model X should be produced? - $90 $30 $15 $15 $20
15 Required information [The following information applies to the questions displayed below.] Martinez Company's relevant range of production is 7,500 units to 12,500 units. When it produces and sells 10,000 units, its average costs per unit are as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Average Cost Per Unit $ 6.20 $ 3.70 $ 1.60 $ 4.00 $ 3.20 $ 2.20 $ 1.20 $ 0.45 10. If 12,500 units are produced, what is the total amount of fixed manufacturing cost incurred to support this level of production? Total foxed manufacturing cost
Answer and solution pls Motor Company manufactures 10,000 units of Part M-l each year for use in its production. The following total costswere reported last year:Direct materials P 20,000Direct labor 55,000Variable manufacturing overhead 45,000Fixed manufacturing overhead 70,000Total manufacturing cost P190,000Valve Company has offered to sell Motor 10,000 units of Part M-l for P18 per unit. If Motor accepts the offer,some of the facilities presently used to manufacture Part M-l could be rented to a third party at an annual rental ofP15,000. Additionally, P4 per unit of the fixed overhead applied to Part M-l would be totally eliminated. ShouldMotor Company accept Valve Company's offer, and why?a. No, because it would be P5,000 cheaper to make the part.b. Yes, because it would be P10,000 cheaper to buy the part.c. No, because it would be P15,000 cheaper to make the part.d. Yes, because it would be P25,000 cheaper to buy the part.
15 es [The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $77 per unit in two geographic regions-East and West. The following information pertains to the company's first year of operations in which it produced 59,000 units and sold 54,000 units. Variable costs per unit: Manufacturing: Direct materials. Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $27 $ 10 $2 $3 The company sold 41,000 units in the East region and 13,000 units in the West region. It determined that $330,000 of its fixed selling and administrative expense is traceable to the West region, $280,000 is traceable to the East region, and the remaining $52,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of…