Hill Fabricators manufactures a variety of parts that the company can use to produce metal stud...

 

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Hill Fabricators manufactures a variety of parts that the company can use to produce metal stud fixtures. The M2 part is a popular universal part used in the production of several other parts at its manufacturing facility in Ohio. At a recent meeting, the managerial accountant reported that 11% of its fixed overhead cots assigned to the M2 part will not continue if Hill Fabricators decides to outsource the production of the M2 part at $44 per unit to its competitor, Mason Manufacturing. The managerial accountant at Hill Fabricators presented the following data that represents the cost to produce 1200 units of the M2 part-in-house: Hill Fabricators Monthly Analysis: Part M2 Direct materials Direct labor Variable overhead costs Fixed overhead costs $31,000 $4000 $21,000 $15,000 What are the monthly avoidable costs if Hill Fabricators outsources the production of the M2 part to Mason Manufacturing? What is the change in operating income? What is the per unit cost to produce the M2 part? Select one: a. $52,800; $7200 increase; $59.17 x b. $66,150; $7200 decrease; $48.04 c. 554,450; S4850 decrease; $48.04 d. $57,650; $4850 increase; $59.17 The correct answer is: $57,650; $4850 increase; $59.17 Hill Fabricators manufactures a variety of parts that the company can use to produce metal stud fixtures. The M2 part is a popular universal part used in the production of several other parts at its manufacturing facility in Ohio. At a recent meeting, the managerial accountant reported that 11% of its fixed overhead cots assigned to the M2 part will not continue if Hill Fabricators decides to outsource the production of the M2 part at $44 per unit to its competitor, Mason Manufacturing. The managerial accountant at Hill Fabricators presented the following data that represents the cost to produce 1200 units of the M2 part-in-house: Hill Fabricators Monthly Analysis: Part M2 Direct materials Direct labor Variable overhead costs Fixed overhead costs $31,000 $4000 $21,000 $15,000 What are the monthly avoidable costs if Hill Fabricators outsources the production of the M2 part to Mason Manufacturing? What is the change in operating income? What is the per unit cost to produce the M2 part? Select one: a. $52,800; $7200 increase; $59.17 x b. $66,150; $7200 decrease; $48.04 c. 554,450; S4850 decrease; $48.04 d. $57,650; $4850 increase; $59.17 The correct answer is: $57,650; $4850 increase; $59.17

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Differential Analysis Make Buy Direct material 31000 Direct labor 4000 Variable Overheads 21000 Avoidable Fixed overhead 15000 x 11 1650 Purchase price 51600 Total relevant Cost 57650 52800 Total Cost of Buying 52800 Total Cost of manufacturing 57650 Costsaving if outsourced 4850 Make Direct material 2583 Direct labor 333 Variable Overhead ... View the full answer