14. ABC Polymer manufacturers 30,000 units of Part D5 each year for use on its production line. At this level of activity the costs the cost per unit is as follows:

Per Unit of Product

Direct materials $3.60

Direct labor $10.00

Variable manufacturing Overhead $2.40

Fixed Manufacturing Overhead $9.00

Total Cost per Part $25.00

An outside supplier has offered to sell 30,000 units of Part D5 each year to Polymer for $22 per part. If Polymer accepts this offer the facilities now being used to manufacture Part D5 could be rented to another company at an annual rental of $60,000. However Polymer has determined that two-thirds of the fixed manufacturing overhead applied to Part D5 would continue even if Part D5 were purchased from an outside supplier.

Required:

Prepare computations showing how much profits will increase or decrease if the outside supplier's offer is accepted.