Question: Assume that Synergy Inc. has been purchasing a component necessary for its final product for $220 a unit. The factory is currently operating at 80%

Assume that Synergy Inc. has been purchasing a component necessary for its final product for $220 a unit. The factory is currently operating at 80% of capacity and no major increase in production is expected in the near future. The cost per unit of manufacturing the component internally is estimated as follows:

Direct materials$ 70Direct labor70Variable factory overhead42Fixed factory overhead56Total cost per unit$238

Calculate the cost savings from manufacturing the component internally.

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