han products manufactures 22,000 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:
Direct materials 4.50 direct labor 5.00 variable manufacturing overhead 2.90
fixed manufacturing overhead 12.00
total cost of part $24.40
An outside supplier has offered to sell 22,000 units of part S 6 each year to Han Products for $44.00 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 $594,200. However, Han Products has determined that two thirds of the fixed manufacturing overhead being applied to part S 6 would continue even if part S 6 were purchased from the outside supplier.
How much will profits increase or decrease if the outside supplier’s offer is accepted? (Input the amount as positive value. Omit the “$” sign in your response.)_________________
What is the total amount of avoidable costs if Han buys the units from an outside supplier? (Omit the “$” sign in your response: total cost_________________