Royal Company manufactures 20,000 units of part R-3 each year for use on its production line. At this level of activity, the cost per unit for part R-3 is:

Direct materials	$	4.80
Direct labor		7.00
Variable manufacturing overhead		3.20
Fixed manufacturing overhead		10.00
Total cost per part	$	25.00

An outside supplier has offered to sell 20,000 units of part R-3 each year to Royal Company for $23.50 per part. If Royal Company accepts this offer, the facilities now being used to manufacture part R-3 could be rented to another company at an annual rental of $150,000. However, Royal Company has determined that $6 of the fixed manufacturing overhead being applied to part R-3 would continue even if part R-3 were purchased from the outside supplier.

Required:

a.	What is the total relevant cost of making the product? (Omit the "$" sign in your response.)

Total relevant cost of making the product (20,000 units)

$

b.	What is the total relevant cost of buying the product? (Omit the "$" sign in your response.)

Total relevant cost of buying the product (20,000 units)

$

c.	What is the opportunity cost of making instead of buying? (Omit the "$" sign in your response.)

Total opportunity cost

$

d.	How much profits will increase or decrease if the outside supplier%u2019s offer is accepted? (Input the amount as a positive value. Omit the "$" sign in your response.)

Profits would by

$