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super Center produces a part (product A) that is used in the manufacture of one of its products. The unit manufacturing costs of this part,

super Center produces a part (product A) that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 12,000 units, are as follows:

Direct materials

$35.00

Direct labour

$12.00

Variable manufacturing overhead

$7.00

Fixed manufacturing overhead

$6.00

Total cost

$60.00

The fixed overhead costs are unavoidable.

Assume Home Center can purchase 12,000 units of the part (product A ) from Tech Company for $56.00 each, and the facilities currently used to make the part could be used to manufacture 12,000 units of another (product B) that would have an $3 per unit contribution margin. If no additional fixed costs would be incurred, what should Home Center do?

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