a) Calculate net advantage of buying the part from the external supplier.

b) Should the offer be accepted or should Elric continue to produce the product in house?

Elric Corporation currently manufactures a part in-house that is a main component of its most important product. The company currently manufactures 10,000 units of the part annually. The cost to manufacture one unit of the part is as follows: Direct Materials Direct Labour Variable Overhead Fixed Overhead Total 40 32 15 12 99 An external supplier has made an offer to provide the part at a cost of $100 and Elric is considering the offer. If the part is purchased externally, Elric has assessed the impact to be as follows: The supervisor overseeing the manufacturing of this part would be laid off. The supervisor's salary is $64,000 per year and is included in fixed overhead. The area used to make the part could be used to expand production to of the main component. This would increase the annual production and sales of another product produced by Elric by 300 units per year. Each sale of this product generates a contribution margin of $275 per unit