Question
Mitake Corporation produces 10,000 parts each year, which are used in the production of one of its products. The unit product cost of a part
Mitake Corporation produces 10,000 parts each year, which are used in the production of one of its products. The unit product cost of a part is $55, computed as follows: Variable production cost $ 25 Fixed production cost $ 30 Unit product cost $ 55 The parts can be purchased from an outside supplier for only $38 each. The space in which the parts are now produced would be idle and fixed production costs would be reduced by one-fourth. Based on these data, the financial advantage (disadvantage) of purchasing the parts from the outside supplier would be:
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