25.A company is considering buying a part that they currently make for one of their products.Thecosts of producing the 6,800 units of the part that are needed every year are as follows.

Per UnitDirect materials$9.00Direct labor$5.00Variable overhead$9.90Supervisor's salary$3.80Depreciation of special equipment$3.20Allocated general overhead$1.70

An outside supplier has offered to make the part and sell it to the company for $31.00 each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $3,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce the partcould be used to make more of one of the company's other products, generating an additional segment margin of $14,500 per year for that product.

Required:

a. Calculate the financial advantage (disadvantage) of accepting the supplier's offer to purchase the part.

b. Should the company make or buy the part?