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For many years, Carthage Inc. has manufactured a small electrical part that is used in the manufacture of its standard diesel tractor model. At a
For many years, Carthage Inc. has manufactured a small electrical part that is used in the manufacture of its standard diesel tractor model. At a business volume of 60,000 units per year, the unit cost and total cost of production for this part is calculated as follows: An outside supplier offered to provide Carthage Inc. with this electrical component at a cost of only $10 per unit, One-third of the fixed manufacturing overhead costs consist of the supervisor's salary and other costs that can be eliminated in the event of purchase of the par. The remaining two-thirds of the fixed manufacturing overhead costs are amortization of the equipment used, which has no resale value. The decision to purchase the part from an outside supplier would have no effect on the company's common fixed overhead costs and the, space currently used for this production could be leased at $80,000 per year. Should Carthage Inc. purchase the part from an outside supplier. Show calculations to support your Required
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