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Han Products manufactures 50,000 units of part 5-6 each year for use on its production line. At this level of activity, the cost per unit

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Han Products manufactures 50,000 units of part 5-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows: Direct materials Direct labour Variable overhead Fixed overhead $ 5.50 11.50 4.50 10.20 Total cost per part $31.70 An outside supplier has offered to sell 50,000 units of part 5-6 each year to Han Products for $28.00 per part. If Han Products accepts this offer, the facilities now being used to manufacture part 5-6 could be rented to another company at an annual rental of $100,000. However, Han Products has determined that two-thirds of the fixed overhead being applied to part 5-6 would continue even if part S-6 were purchased from the outside supplier. Required: What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Do not round intermediate calculations) Your Retail Store's accountant prepared the following income statement for the ladies' accessories product line: Sales Less: Variable expenses $2,950,000 1,386,500 1,563,500 Contribution margin Less: Fixed expenses: Wages Insurance on inventory Advertising $1,062,000 59,000 649,000 1.770,000 $ (206,500) Net operating income (loss) Management is concerned about the loss and is considering dropping the product line. If the product line is dropped, a job has to be created elsewhere for a long-term employee currently earning an annual salary of $88,500 Required: Calculate the increase or decrease in the operating income in both alternatives. Keep Accesories Product Line Drop Accesories Product Line Sales Fixed expenses

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