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:
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Direct materials
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$5.40
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Direct labor
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7.00
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Variable manufacturing overhead
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3.10
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Fixed manufacturing overhead
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12.00
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Total cost per part
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$27.50
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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?