Cohasset Company currently manufactures all component parts used in the manufacture of various hand tools.Hurley Division produces a steel handle used in three different tools.The budget for these handles is 120,000 units with the following unit cost. Ironwood Division purchases 20,000 handles from Hurley Division and completes the hand tools.An outside supplier,R & M Steel,has offered to supply 20,000 units of the handle to Ironwood Division for $1.25 per unit.Hurley currently has idle capacity that cannot be used.What is the cost impact to Cohasset as a whole of purchasing from R & M Steel? (CMA adapted)
A)increase the handle unit cost by $0.05.
B)increase the handle unit cost by $0.15.
C)decrease the handle unit cost by $0.15.
D)decrease the handle unit cost by $0.25.

Question

Cohasset Company currently manufactures all component parts used in the manufacture of various hand tools.Hurley Division produces a steel handle used in three different tools.The budget for these handles is 120,000 units with the following unit cost.  Ironwood Division purchases 20,000 handles from Hurley Division and completes the hand tools.An outside supplier,R & M Steel,has offered to supply 20,000 units of the handle to Ironwood Division for $1.25 per unit.Hurley currently has idle capacity that cannot be used.What is the cost impact to Cohasset as a whole of purchasing from R & M Steel? (CMA adapted)
A)increase the handle unit cost by $0.05. 
B)increase the handle unit cost by $0.15. 
C)decrease the handle unit cost by $0.15. 
D)decrease the handle unit cost by $0.25.

Quizplus · Accepted Answer

The Answer of Cohasset Company currently manufactures all component parts used in the manufacture of various hand tools.Hurley Division produces a steel handle used in three different tools.The budget for these handles is 120,000 units with the following unit cost.  Ironwood Division purchases 20,000 handles from Hurley Division and completes the hand tools.An outside supplier,R & M Steel,has offered to supply 20,000 units of the handle to Ironwood Division for $1.25 per unit.Hurley currently has idle capacity that cannot be used.What is the cost impact to Cohasset as a whole of purchasing from R & M Steel? (CMA adapted)
A)increase the handle unit cost by $0.05. 
B)increase the handle unit cost by $0.15. 
C)decrease the handle unit cost by $0.15. 
D)decrease the handle unit cost by $0.25.

Cohasset Company Currently Manufactures All Component Parts Used in the Manufacture