Han Products manufactures 32,000 units of part S-6 each year for use on its productionline. At this level of activity, the cost per unit for part S-6 is as follows:Direct materialsDirect labourVariable overheadFixed overheadTotal cost per partAn outside supplier has offered to sell 32,000 units of part S-6 each year to HanProducts for £22 per part. If Han Products accepts this offer, the facilities now beingused to manufacture part S-6 could be rented to another company at an annual rental of£83,000. However, Han Products has determined that two-thirds of the fixed overheadbeing applied to part S-6 would continue even if part S-6 were purchased from theoutside supplier.Required:Prepare computations to show the net advantage or disadvantage of accepting theoutside supplier's offer. (Enter all the answers as positive values. Round your per unitanswers to 2 decimal place.)Cost of purchasingCost of making:Direct materialsDirect labourVariable overheadFixed overheadTotal costRental value of the space (opportunity cost)Total cost, including opportunity costNet£ 3.4011.002.609.00£26.00in favour of buyingPer Unit Differential CostsMakeBuy32,000 UnitsMakeBuy

The differential costs are calculated on the basis of difference in buying and manufacturing a…

an Products manufactures 32,000 units of part S-6 each year for use on its production e. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total cost per part £ 3.40 11.00 2.60 9.00 £26.00 n outside supplier has offered to sell 32,000 units of part S-6 each year to Han roducts for £22 per part. If Han Products accepts this offer, the facilities now being sed to manufacture part S-6 could be rented to another company at an annual rental of 33,000. However, Han Products has determined that two-thirds of the fixed overhead eing applied to part S-6 would continue even if part S-6 were purchased from the utside supplier. equired: repare computations to show the net advantage or disadvantage of accepting the utside supplier's offer. (Enter all the answers as positive values. Round your per unit nswers to 2 decimal place.)

an Products manufactures 32,000 units of part S-6 each year for use on its production e. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total cost per part £ 3.40 11.00 2.60 9.00 £26.00 n outside supplier has offered to sell 32,000 units of part S-6 each year to Han roducts for £22 per part. If Han Products accepts this offer, the facilities now being sed to manufacture part S-6 could be rented to another company at an annual rental of 33,000. However, Han Products has determined that two-thirds of the fixed overhead eing applied to part S-6 would continue even if part S-6 were purchased from the utside supplier. equired: repare computations to show the net advantage or disadvantage of accepting the utside supplier's offer. (Enter all the answers as positive values. Round your per unit nswers to 2 decimal place.)

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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