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Han Products manufactures 22,000 units of part 5-6 each year for use on its production line. At this level of activity, the cost per unit for part 5-6 is: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Total cost per part $ 3.60 10.00 2.40 6.00 $ 22.00 An outside supplier has offered to sell 22,000 units of part 5-6 each year to Han Products for $20 per part. If Han Products accepts this offer, the facilities now being used to manufacture part 5-6 could be rented to another company at an annual rental of $72,000. However, Han Products has determined that two-thirds of the fixed manufacturing overhead being applied to part 5-6 would continue even if part 5-6 were purchased from the outside supplier. Required: What is the financial advantage (disadvantage) of accepting the outside supplier's offer? Bed & Bath, a retailing company, has two departments--Hardware and Linens. The company's most recent monthly contribution format income statement follows: Sales Variable expenses Contribution margin Fixed expenses Net operating income (loss) Department Total Hardware Linens $4,370,000 $3,180,000 $1,190,000 1,384,000 984,000 400,000 2,986,000 2,196,000 790,000 2,280,000 1,440,000 840,000 $ 706,000 $ 756,000 $ (50,000) A study indicates that $376,000 of the fixed expenses being charged to Linens are sunk costs or allocated costs that will continue even if the Linens Department is dropped. In addition, the elimination of the Linens Department will result in a 18% decrease in the sales of the Hardware Department. Required: What is the financial advantage (disadvantage) discontinuing the Linens Department