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Supler Company produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as follows:

6.  Supler Company produces a part used in the manufacture of one of its products. The unit product cost is $18, computed as follows:
Direct materials $ 8
Direct labor    4
Variable manufacturing overhead    1
Fixed manufacturing overhead    5
Unit product cost $18
An outside supplier has offered to provide the annual requirement of 4,000 of the parts for only $14 each. It is estimated that 60 percent of the fixed overhead cost above could be eliminated if the parts are purchased from the outside supplier. Based on these data, the per-unit dollar advantage or disadvantage of purchasing from the outside supplier would be:
a.  $4 disadvantage
b.  $1 advantage
c.  $1 disadvantage
d.  $2 advantage

This question was asked on May 08, 2010.

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