Solution-Prepare computations to show the net dollar

Prepare computations to show the net dollar advantage

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Reference no: EM133088165

Question - Han Products manufactures 55,500 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 as follows:

Direct materials	$6.66
Direct labour	18.50
Variable overhead	4.44
Fixed overhead	16.65
Total cost per part	$46.25

An outside supplier has offered to sell 48,000 units of part S-6 each year to Han Products for $38.85 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 $148,000. However, Han Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier.

Required - Prepare computations to show the net dollar advantage or disadvantage of accepting the outside supplier's offer.

Reference no: EM133088165

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Prepare computations to show the net dollar advantage

Reference no: EM133088165

Reference no: EM133088165

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