The fixed manufacturing overhead listed above represents an

Reference no: EM13576443

Smithtone Company uses 8,000 units of a certain part in production each year. Presently, this part is purchased from an outside supplier at $12 per unit. For some time now there has been idle capacity in the factory that could be utilized to make this part. The following information has been assembled on the unit costs of making this part internally:

The fixed manufacturing overhead listed above represents an allocation of existing costs to this part. However, there would be an increase of $12,000 in fixed manufacturing overhead costs for the salary of a new supervisor.

Suppose that the idle capacity is presently being rented to another company for $32,000 per year. All the other conditions are still the same. If Smithtone chooses to make the part instead of buying it outside, the net advantage or disadvantage would be?

Reference no: EM13576443

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