Reference no: EM132615070

Han Products manufactures 52,500 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows:

Direct materials $5.75

Direct labour 11.75

Variable overhead 4.75

Fixed overhead 10.35

Total cost per part$32.60

An outside supplier has offered to sell 52,500 units of part S-6 each year to Han Products for $28.75 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $102,000. However, Han Products has determined that two-thirds of the fixed overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:

Problem 1: What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Do not round intermediate calculations)