Harrison Enterprises currently produces 8,000 units of part B13. Current unit costs for part B13 are as follows: $$\begin{array} { l r }
\text { Direct materials } & \$ 12 \
\text { Direct labor } & 9 \
\text { Factory rent } & 7 \
\text { Administrative costs } & 10 \
\text { General factory overhead (allocated) } & 7 \
\text { Total } & \underline { \$ 45 }
\end{array}$$ If Harrison decides to buy part B13, 50% of the administrative costs would be avoided. All of the company's items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Harrison for $31 per unit. What will occur if the company accepts the offer?

Question

Harrison Enterprises currently produces 8,000 units of part B13. Current unit costs for part B13 are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 12 \
\text { Direct labor } & 9 \
\text { Factory rent } & 7 \
\text { Administrative costs } & 10 \
\text { General factory overhead (allocated) } & 7 \
\text { Total } & \underline { \$ 45 }
\end{array}$$ If Harrison decides to buy part B13, 50% of the administrative costs would be avoided. All of the company's items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Harrison for $31 per unit. What will occur if the company accepts the offer?

Quizplus · Accepted Answer

The Answer of Harrison Enterprises currently produces 8,000 units of part B13. Current unit costs for part B13 are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 12 \
\text { Direct labor } & 9 \
\text { Factory rent } & 7 \
\text { Administrative costs } & 10 \
\text { General factory overhead (allocated) } & 7 \
\text { Total } & \underline { \$ 45 }
\end{array}$$ If Harrison decides to buy part B13, 50% of the administrative costs would be avoided. All of the company's items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Harrison for $31 per unit. What will occur if the company accepts the offer?

Harrison Enterprises Currently Produces 8,000 Units of Part B13 If Harrison Decides to Buy Part B13, 50% of the Unit