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Supler Corporation produces a part used in the manufacture of one of its products. The unit cost of the product is $21, calculated as follows:

Supler Corporation produces a part used in the manufacture of one of its products. The unit cost of the product is $21, calculated as follows:

Direct materialsps8
Direct labour7
Variable manufacturing overhead2
Fixed manufacturing costs4
unit cost of productps21


An outside vendor has offered to provide the annual requirement of 4,400 parts for only $10 each. The company estimates that 50% of the aforementioned fixed manufacturing overhead costs could be eliminated if parts are purchased from an outside vendor. Assume that direct labor is an avoidable cost in this decision. Based on these data, the economic advantage (disadvantage) of purchasing the parts from the external supplier would be ?

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