Question Waiting for answers Sherwood Company is currently manufacturing part Z911, producing 40,000 units annually. The part is used in the production of several products made by Sherwood. The cost per unit for Z911 is as follows: Direct materials                   $ 9.00 Direct labor                            3.00 Variable overhead            2.50 Fixed overhead                    4.00 Total                              $18.50 Of the total fixed overhead assigned to Z911, $88,000 is direct fixed overhead (the lease of production machinery and salary of a production line supervisor—neither of which will be needed if the line is dropped). The remaining fixed overhead is common fixed overhead. An outside supplier has offered to sell the part to Sher- wood for $16. There is no alternative use for the facilities currently used to produce the part.   Required 1.    Should Sherwood Company make or buy part Z911? 2.    What is the most Sherwood would be willing to pay an outside supplier? 3.    If Sherwood bought the part, by how much would income increase or decrease?  

S5OSXH The Asker · Accounting
  Sherwood Company is currently manufacturing part Z911, producing 40,000 units annually. The part is used in the production of several products made by Sherwood. The cost per unit for Z911 is as follows:  Direct materials                   $ 9.00  Direct labor                            3.00  Variable overhead            2.50  Fixed overhead                    4.00  Total                              $18.50  Of the total fixed overhead assigned to Z911, $88,000 is direct fixed overhead (the lease of production machinery and salary of a production line supervisor—neither of which will be needed if the line is dropped). The remaining fixed overhead is common fixed overhead. An outside supplier has offered to sell the part to Sher- wood for $16. There is no alternative use for the facilities currently used to produce the part.     Required  1.    Should Sherwood Company make or buy part Z911?  2.    What is the most Sherwood would be willing to pay an outside supplier?  3.    If Sherwood bought the part, by how much would income increase or decrease?     
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