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Question - Han Products manufactures 19,000 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is:
Direct materials
$5.40
Direct labor
7.00
Variable manufacturing overhead
3.10
Fixed manufacturing overhead
12.00
Total cost per part
$27.50
An outside supplier has offered to sell 19,000 units of part S-6 each year to Han Products for $44.00 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 $478,500. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.
Required: Calculate the per unit and total relevant cost for buying and making the product?
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