• 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. Prepare computations showing how much profits will increase or decrease if the outside supplier’s offer is accepted. b. Would Royal Company accept the offer or not? (Yes or No and give your reasons for 3 sentences only).