Reference no: EM13592918

Supler Company produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as follows:

• Direct materials = $8
• Direct labor = $4
• Variable manufacturing overhead = $1
• Fixed manufacturing overhead = $5
• Unit product cost = $18

An outside supplier has offered to provide the annual requirement of 4,000 of the parts for only $14 each. It is estimated that 60 percent of the fixed overhead cost above could be eliminated if the parts are purchased from the outside supplier. Based on these data, the per-unit dollar advantage or disadvantage of purchasing from the outside supplier would be:

$1 disadvantage
$1 advantage
$2 advantage
$4 disadvantage
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