Larry Corporation makes 1,000 units of Part P10 each year. This part is used in one of the companys products. The companys

Accounting Department reports the following costs of producing the part at this level of activity:

	Per Unit
Variable manufacturing	$52
Supervisory salary	$38
Allocated general overhead	$50

An outside supplier has offered to make and sell the part to the company for $118 each.

If this offer is accepted:

* the supervisors salary can be eliminated entirely

* 40% of allocated general overhead costs would be avoided.

* the space used to produce part P10 would be rented for $9,000 per year.

If Larry buys 1,000 units of P10 from outside (rather than making them), which of the following will result in?

Answers:	A. $8,000 disadvantage
	B. $12,000 Advantage
	C. $11,000 disadvantage
	D. $1,000 advantage