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Han Products manufactures 20.000 units of part S-6 each year for use on its production line. At this level of activity the cost per unit
Han Products manufactures 20.000 units of part S-6 each year for use on its production line. At this level of activity the cost per unit for part S-6 is as follows: An outside supplier has offered to sell 20.000 units of part S-6 each year to Han Products for $46.50 per part. If Han Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $515,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the total amount of avoidable costs if Han buys the units from an outside supplier? (Omit the " $ " sign in your response.) How much will profits increase or decrease if the outside supplier's offer is accepted?(Input the amount as positive value. Omit the " $ " sign in your response.)
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