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Dentech, Inc., uses 13 units of part RM67 each month in the production of dentistry equipment. The cost of manufacturing one unit of RM67 is

Dentech, Inc., uses 13 units of part RM67 each month in the production of dentistry equipment. The cost of manufacturing one unit of RM67 is the following:

Direct material $ 3,000
Material handling (20% of direct-material cost) 600
Direct labor 34,000
Manufacturing overhead (150% of direct labor) 51,000

Total manufacturing cost $ 88,600

Material handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead. Dentechs annual manufacturing overhead budget is one-third variable and two-thirds fixed. Scott Supply, one of Dentechs reliable vendors, has offered to supply part number RM67 at a unit price of $55,000.

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1.

If Dentech purchases the RM67 units from Scott, the capacity Dentech used to manufacture these parts would be idle. Should Dentech decide to purchase the parts from Scott, the unit cost of RM67 would increase (or decrease) by what amount?

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