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Frank Co. is currently operating at 80% of capacity and is currently purchasing a part used in its manufacturing operations for $25 unit. The unit
Frank Co. is currently operating at 80% of capacity and is currently purchasing a part used in
its manufacturing operations for $25 unit. The unit cost for Frank Co. to make the part is $30,
which includes $3 of allocated common fixed costs. If 20,000 units of the part are normally
purchased each year but could be manufactured using unused capacity, what would be the
amount of incremental cost increase or decrease for making the part rather than purchasing
it?
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