Question
3. (4 points) Supler Company produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as
3. (4 points) 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 $ 9 Direct labor 4 Variable manufacturing overhead 1 Fixed manufacturing overhead 5 Unit product cost $19 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:
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