Disadvantage of purchasing from outside supplier

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Reference no: EM13145099

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:

Reference no: EM13145099

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