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Han Products manufactures 52,500 units of part 5-6 each year for use on its production line. At this level of activity, the cost per unit
Han Products manufactures 52,500 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 matenals Direct labour Variable overhead Fixed overhead $ 5.75 11.75 4.75 10.35 Total cost per part $32.60 An outside supplier has offered to sell 52,500 units of part S-6 each year to Han Products for $28.75 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 $102,000. 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)
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