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Han Products manufactures 32,000 units of the S-6 part each year for use on its production line. At this level of activity, the cost per

Han Products manufactures 32,000 units of the S-6 part each year for use on its production line. At this level of activity, the cost per unit of part S-6 is:

Direct materialsps3.60
Direct labour9.00
Variable manufacturing overhead2.40
Fixed manufacturing costs6.00
total cost per partps21.00

An outside vendor has offered to sell 32,000 units of the S-6 part each year to Han Products for $19 per part. If Han Products accepts this offer, the facility now used to manufacture the S-6 part could be leased to another company for an annual rent of $82,000. However, Han Products has determined that two-thirds of fixed manufacturing overhead costs that apply to the S-6 part would continue even if the S-6 part was purchased from the third-party vendor.

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What is the financial advantage (disadvantage) of accepting the offer of the external provider?

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