Harrison Enterprises currently produces 8,000 units of part B13. Current unit costs for part B13 are...

Harrison Enterprises currently produces 8,000 units of part B13. Current unit costs for part B13 are as follows: Direct materials $12 Direct labor 9 Factory rent 7 Administrative costs 10 General factory overhead (allocated) 7 Total $45 If Harrison decides to buy part B13, 50% of the administrative costs would be avoided. All of the company’s items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Harrison for $31 per unit. What will occur if the company accepts the offer?

The cost for this part will decrease by $14 per unit.

The cost for this part will be the same.

The cost for this part will decrease by $10 per unit.

The cost for this part will increase by $5 per unit.

Solutions

Expert Solution

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Lakeside Inc. produces a product that currently sells for $52.00 per unit. Current production costs per...

Lakeside Inc. produces a product that currently sells for $52.00 per unit. Current production costs per unit include direct materials, $14; direct labor, $16; variable overhead, $7.00; and fixed overhead, $7.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 8,400 units at $38.40 per unit. Lakeside currently has...

Lakeside Inc. produces a product that currently sells for $68.40 per unit. Current production costs per...

Lakeside Inc. produces a product that currently sells for $68.40 per unit. Current production costs per unit include direct materials, $28; direct labor, $30; variable overhead, $14.00; and fixed overhead, $14.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Required: a. What would be the incremental profit or loss if Lakeside could sell the refined version of its product...

Lakeside Inc. produces a product that currently sells for $78.00 per unit. Current production costs per...

Lakeside Inc. produces a product that currently sells for $78.00 per unit. Current production costs per unit include direct materials, $30; direct labor, $32; variable overhead, $15.00; and fixed overhead, $15.00. Product engineering has determined that certain production changes could refine the product quality and functionality. These new production changes would increase material and labor costs by 20% per unit. Lakeside has received an offer from a nonprofit organization to buy 10,000 units at $78.00 per unit. Lakeside currently has...

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows:

Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6,000 units, are as follows: Direct materials $4.00 Direct labour $4.00 Variable manufacturing overhead $3.00 Fixed manufacturing overhead $4.00 Total cost $15.00 The fixed overhead costs are unavoidable. Assuming Cruise Company can purchase 6,000 units of the part from Suri Company for $13 each, and the facilities currently used to...

1. Under absorption costing, a company had the following unit costs when 8,000 units were produced. ...

1. Under absorption costing, a company had the following unit costs when 8,000 units were produced. Direct labor $ 8.50 per unit Direct material $ 9.00 per unit Variable overhead $ 6.75 per unit Fixed overhead ($60,000/8,000 units) $ 7.50 per unit Total production cost $ 31.75 per unit Compute the total production cost per unit under variable costing if 25,000 units had been produced. A) $31.75 B) $27.25 C) $26.25 D) $24.25 E) $17.50 2. When evaluating a special order,...

Alberts Enterprises has sales of 3,000 units at $80 per unit. Variable costs are 35% of...

Alberts Enterprises has sales of 3,000 units at $80 per unit. Variable costs are 35% of the sales price. If total fixed costs are $66,000, what is the the degree of operating leverage?

Salem Corporation's relevant range of activity is 5,000 units to 8,000 units. When it produces and...

Salem Corporation's relevant range of activity is 5,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $6.55 Direct labor $4.00 Variable manufacturing overhead $2.30 Fixed manufacturing overhead $5.20 Fixed selling expense $1.35 Fixed administrative expense $1.40 Sales commissions $2.30 Variable administrative expense $1.45 1- For financial reporting purposes, what is the total amount of product costs incurred to make 6,000 units? 2- For...

Pennyback Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and...

Pennyback Corporation's relevant range of activity is 4,000 units to 8,000 units. When it produces and sells 6,000 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $6.40 Direct labor $3.80 Variable manufacturing overhead $1.60 Fixed manufacturing overhead $3.00 Fixed selling expense $0.75 Fixed administrative expense $0.60 Sales commissions $1.50 Variable administrative expense $0.45 Required For financial reporting purposes, what is the total amount of product costs incurred to make 6,000 units? For financial...

Bush Industries currently manufactures 56,000 units of a product with the following costs per unit Direct...

Bush Industries currently manufactures 56,000 units of a product with the following costs per unit Direct materials......................................... $6.00 Direct labor.............................................. $18.00 Variable manufacturing overhead............ $9.00 Fixed manufacturing overhead................$12.00 Variable selling..........................................$3.00 Fixed selling..............................................$4.00 The company has the capacity to produce 60,000 units. The product regularly sells for $60. A wholesaler has offered to pay $55 a unit for 5,000 units and will pick up the units, thereby saving Bush the variable selling costs. If the special order is accepted, what would be...

Kobe Company manufactures a part for its production cycle. The costs per unit for 20,000 units...

Kobe Company manufactures a part for its production cycle. The costs per unit for 20,000 units of this part are as follows: Direct materials $15 Direct labor 12 Variable factory overhead 20 Unavoidable fixed factory overhead 18 Total cost $65 The Kobe Company has been approached by a supplier who claims it can sell Kobe Company 20,000 units of the same part for $940,000. Required: a. Assuming there is no alternative use for the facilities, how much money would Kobe...

Subjects