Lynn Hart is a managerial accountant at Paibec Corporation. Paibec is under intense cost competition, and Hart has been asked to evaluate whether Paibec should continue to manufacture part MT-RF or purchase it from Marley Company. Marley has submitted a bid to supply the 37,000 MT-RF units that Paibec will need for 2021 at a price of $18.00 each.

From plant records and interviews with Jane Porter, the plant manager, Hart gathered the following information regarding Paibec's costs to manufacture 35,000 units of MT-RF in 2020:

Porter also tells her that:

• if MT-RF is not outsourced, all variable costs per unit, space rental costs, and equipment lease costs will be the same in 2021 as in 2020,
• if MT-RF is purchased from Marley, plant space will not have to be rented, and equipment will not have to be leased, but it will cost $10,500 and $4,000, respectively, to terminate the two contracts, and
• if MT-RF is purchased from Marley, none of the fixed overhead costs can be avoided.

Hart recognizes that Porter is probably concerned that outsourcing MT-RF will result in some of her close friends being laid off. She therefore performs her own independent analysis, and determines that:

• if MT-RF is not outsourced, direct material and direct labor costs per unit are more likely to be higher in 2021 by 9% and 4%, respectively,
• if MT-RF is purchased from Marley, the contract termination costs will actually be $8,500 for the space rental and $2,000 for the equipment lease, and
• if MT-RF is purchased from Marley, $10,000 of the fixed overhead costs can actually be saved.

Hart estimates that 37,000 units of MT-RF will be needed in 2021.

REQUIRED [Note: Round unit cost computations to the nearest cent]

Based on Hart's estimates, if MT-RF is purchased from Marley in 2021, what will be the effect on Paibec's profits? [Note: if the buy costs are less than the make costs, enter the difference as a positive number; if the make costs are less than the buy costs, enter the difference as a negative number.]

$189,000 119,000 88,000 Direct materials Direct labor Plant space rental [fixed] Equipment lease [fixed] Other overhead Variable Fixed 39,000 95,200 142,800 $673,000 Total