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Han Products manufactures 42,500 units of part S-6 each year for use on its production...

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Accounting

Han Products manufactures 42,500 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 $ 4.75
Direct labour 10.75
Variable overhead 3.75
Fixed overhead 9.75
Total cost per part $ 29.00

An outside supplier has offered to sell 42,500 units of part S-6 each year to Han Products for $25.75 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 $94,000. However, Han Products has determined that two-thirds of the fixed overhead being applied to part S-6 would continue even if part S-6 were purchased from the outside supplier.

Required:

What is the net dollar advantage or disadvantage of accepting the outside suppliers offer? (Do not round intermediate calculations)

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