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Dionne currently manufactures a subcomponent that is used in its main product. A supplier has offered to supply all the subcomponents needed at a price of $121. Dionne currently produces 20,200 subcomponents at the following manufacturing costs:


 Per unit
  Direct materials $ 42
  Direct labor
32
  Variable manufacturing overhead
35
  Fixed manufacturing overhead
16




      Unit cost
125





a.

If Dionne has no alternative uses for the manufacturing capacity, what would be the profit impact of buying the subcomponents from the supplier? (Input the amount as positive value. Omit the "$" sign in your response.)
  (Click to select) More or Less profit? $   
b.

If Dionne has no alternative uses for the manufacturing capacity, what would be the maximum price per unit they would be willing to pay the supplier? (Omit the "$" sign in your response.)
  Maximum price $    per unit
c.

Now assume Dionne would avoid $320,000 in equipment leases and salaries if the subcomponent were purchased from the supplier. Now what would be the profit impact of buying from the supplier? (Input the amount as positive value. Omit the "$" sign in your response.)
  (Click to select) Less or More profit? $   

Accounting Basics, Accounting

  • Category:- Accounting Basics
  • Reference No.:- M9955521

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