han products manufactures 30 000 units of part s 6 each year 276132

Han Products manufactures 30,000 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:



An outside supplier has offered to sell 30,000 units of part S 6 each year to Han Products for $21 per part. If Han 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 $80,000. However, Han Products has determined that two thirds of the fixed manufacturing overhead being applied to part S 6 would continue even if part S 6 were purchased from the outside supplier.

Required:

Prepare computations showing how much profits will increase or decrease if the outside supplier’s offer isaccepted.