Instruction Final Exam ACC231 Question 31 (of 40) Time remaining 0:51:3 31. Foul
ID: 2588710 • Letter: I
Question
Instruction Final Exam ACC231 Question 31 (of 40) Time remaining 0:51:3 31. Foulds Company makes 9 000 units per year of a part i uses in the products i manufactures. The unit $ 12.40 20.00 Direct materials Direct labor Variable manufacturing overhead2.20 Fixed manufacturing overhead10.10 Unit product cost $44.70 de An outside supplier has offered to sell the company all of these parts it needs for $41 50 a unit If the of a product that is in high demand. The addišional contribution margin on this other product would bo $54,000 per year f the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided However $6 00 of the fixed manufacturing overhead cost being appled to the part would coninue even i the part ware purchased from the outside supplier. This fxed manufacturing overhead cost would be applied to the company's remaining products Required a. How much of the unit product cost of $44 70 is relevant in the decision of whother to make or buy the part? (Round your answer to 2 decimal places.) Relevant cost per unt Type here to searchExplanation / Answer
Answer to Part a)
Relevant Cost per unit = Direct Materials + Direct Labor + Variable Manufacturing Overhead + Fixed Manufacturing Overhead
While Considering the Relevant Cost, such part of Fixed Manufacturing Overhead is irrelevant which would continue even if the product is purchased from oustside supplier.
Relevant Fixed Manufacturing Overhead = $10.10 - $6
Relevant Fixed Manufacturing Overhead = $4.10
Relevant Cost per unit = $12.40 + $20.00 + $2.20 + $4.10
Relevant Cost per unit = $38.70
Answer to Part b)
Manufacturing Cost Savings (9,000 * $38.70)
348,300
Additional Contribution Margin
54,000
Cost of Purchasing (9,000 * $41.50)
(373,500)
Net Advantage
28,800
Answer to Part c)
Manufacturing Cost Savings (9,000 * $38.70)
348,300
Additional Contribution Margin
54,000
Total Benefit
402,300
Number of Units
9,000
Benefit per unit
$44.70
Manufacturing Cost Savings (9,000 * $38.70)
348,300
Additional Contribution Margin
54,000
Cost of Purchasing (9,000 * $41.50)
(373,500)
Net Advantage
28,800