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Xian Products manufactures 27,500 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit

Xian Products manufactures 27,500 units of part S-6 each year for use on its production line. At this level of activity, the cost per unit for part S-6 is as follows:

Direct materials

Direct labour

Variable overhead

Fixed overhead

Total cost per part

$ 3.25

9.25

2.25

8.85

$23.60

An outside supplier has offered to sell 24,000 units of part S-6 each year to Han Products for $21.25 per part. If Xian Products accepts this offer, the facilities now being used to manufacture part S-6 could be rented to another company at an annual rental of $82,000.

However, Xian Products has determined that 30% of the fixed overhead being applied to part S-6 will be avoided if part S-6 is purchased from the outside supplier.

Required:

1. What is the net dollar advantage or disadvantage of accepting the outside supplier's offer? (Round "Total costs" and final answer to the nearest whole dollar amount.)

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