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 $40 per unit to its competitor,Mason Manufacturing.The managerial accountant at Hill Fabricators presented the following data that represents the cost to produce 1,100 units of the M2 part in-house:
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?

Question

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 $40 per unit to its competitor,Mason Manufacturing.The managerial accountant at Hill Fabricators presented the following data that represents the cost to produce 1,100 units of the M2 part in-house: 
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?

Quizplus · Accepted Answer

D)
Avoidable cost:[$30,000 + $4,000 + $16,000 + ($12,000 × 11%)= $50,000 + $1,320 = $51,320
Operating income: [$51,320 - ($40 × 1,100)= $51,320 - $44,000 = $7,320 increase
Unit cost per unit ($62,000/1,100= $56.36)

Hill Fabricators Manufactures a Variety of Parts That the Company