Question
Han products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost perunit for
Han products manufactures 30,000 units of part S-6 each year for use on its production line. At this level of activity, the cost perunit for part 5-6 is as follows: Direct materials $3.60 Direct labor 10.00 Variable MOH 2.40 Fixed MOH 9.00 An outside supplier has offered to sell 30,000 units of part S-6 each year to Han Products for $21 per part. If Han accepts the offer, the facilities now being used to manufacture part $-6 could be rented to another company at the annual rental of $80,000. However, Han has determined that two-thirds of the fixed manufacturing overhead being applied to part 5-6 would continue even if part S-6 were purchased from the outside supplier. If Han chose to purchase the part from the outside supplier, then what is the change in annual net operating income due to accepting the offer
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