Ahrends Corporation makes 70,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed asfollows:Direct materialsDirect laborVariable manufacturing overhead.Fixed manufacturing overheadUnit product cost$ 17.8019.001.0017.10$ 54.90An outside supplier has offered to sell the company all of these parts it needs for $48.50 a unit. If the company accepts this offer, the facilities nowbeing used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this otherproduct would be $273,000 per year.If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, $8.20 of the fixedmanufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixedmanufacturing overhead cost would be applied to the company's remaining products.What is the financial advantage (disadvantage) of purchasing the part rather than making it? (Round your intermediate calculations to 2 decimalplaces.)Multiple Choice($126,000)О$273,000

Part 2: Explanation Step 1: Calculate the total cost of making the part- Direct materials: $17.80-…

Answered: Ahrends Corporation makes 70,000 units…

Managerial Accounting

15th Edition

ISBN:9781337912020

Author:Carl Warren, Ph.d. Cma William B. Tayler

Publisher:Carl Warren, Ph.d. Cma William B. Tayler

Chapter11: Differential Analysis And Product Pricing

Section: Chapter Questions

Problem 3CMA: Aril Industries is a multiproduct company that currently manufactures 30,000 units of Part 730 each...

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