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Q1) Mennekes Company produces the plugs used in its manufacturing cycle at cost of $36 per unit (that includes $28 of variable manufacturing and $8 of fixed overhead). Mennekes requires 30,000 of these plugs annually. Fry's Electronics has offered to sell these units to Mennekes at $33 per unit. If Mennekes makes a decision to buy plugs, $60,000 of annual fixed overhead will be eradicated, and company may be able to rent facility previously used for manufacturing the plugs.

A. If Mennekes Company buys plugs but doesn't rent unused facility, what is the per unit impact on the company?

B. If plugs are bought and facility rented, Mennekes Company desires to realize $100,000 in savings annually. To get this goal, what should be minimum annual rent on the facility?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M919035

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