Han Products manufactures 25,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part 5-6 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.90 8.00 2.10 6.00 $ 20.00 An outside supplier has offered to sell 25,000 units of part 5-6 each year to Han Products for $18 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company for $75,000 per year. However, Han Products determined two-thirds of the fixed manufacturing overhead being applied to part 5-6 would continue even if part 5-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?

Han Products manufactures 25,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part 5-6 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.90 8.00 2.10 6.00 $ 20.00 An outside supplier has offered to sell 25,000 units of part 5-6 each year to Han Products for $18 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company for $75,000 per year. However, Han Products determined two-thirds of the fixed manufacturing overhead being applied to part 5-6 would continue even if part 5-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer?

Principles of Accounting Volume 2

19th Edition

ISBN:9781947172609

Author:OpenStax

Publisher:OpenStax

Chapter5: Process Costing

Section: Chapter Questions

Problem 1PB: The following product costs are available for Stellis Company on the production of erasers: direct...

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