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Han Products manufactures 21,000 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 21,000 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:

Direct materials $ 4.60
Direct labor 5.00
Variable manufacturing overhead 2.40
Fixed manufacturing overhead 12.00
Total cost per part $ 24.00

An outside supplier has offered to sell 21,000 units of part S-6 each year to Han Products for $39.50 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 $498,500. 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:

1. Calculate the per unit and total relevant cost for buying and making the product. (Round your "per unit" answers to 2 decimal places.)

2. How much will profits increase or decrease if the outside suppliers offer is accepted?

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