An outside supplier has offered to sell hanson inc. all of, Ask an Expert

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Hanson, Inc. makes 1,000 units per year of a part called a "prositron" for use in one of its products. Data concerning the unit production costs of the prositron follow:
Direct Materials $342

Direct Labor 80

Variable Manufacturing OH 48

Fixed Manufacturing OH 520

Total $990

An outside supplier has offered to sell Hanson, Inc. all of the prositrons it requires. If Hanson, Inc. decided to discontinue making the prositrons, 10% of the above fixed manufacturing overhead costs could be avoided.

Required: Assume Hanson, Inc. has no alternative use for the facilities presently devoted to production of the prositrons. If the outside supplier offers to sell the prositrons for $850 each, should Hanson, Inc. accept the offer? Fully support your answer with appropriate calculations.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M964115

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