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Kerbow Corporation uses part B76 in one of its products. The company's Accounting Department reports the following costs of producing the 12,000 units of the
Kerbow Corporation uses part B76 in one of its products. The company's Accounting Department reports the following costs of producing the 12,000 units of the part that are needed every year. Per Unit Direct material $7.20 Direct labor $7.10 Variable overhead $3.50 Supervisor's salary Depreciation of special equipmen.. Allocated general overhead $4.70 $3.40 $2.40 An outside supplier has offered to make the part and sell it to the company for $27.40 each. If this offer is accepted, the supervisor's salary can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $6,000 of these allocated general overhead costs would be avoided. In addition, the space used to produce part B76 could be used to make more of one of the company's other products, generating an additional segment margin of $29,000 per year for that product What would be the impact on profit if Kerbow buys the part from the outside supplier
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