Question $11(10$ points$)$

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Norgaard Corporation makes $8,000$ units of part G$25$ each year. This part is used in one of the company's products. The company's Accounting Department reports the following costs of producing the part at this level of activity:

Per UnitDirect materials$ $6\mathrm{.}70$Direct labor$ $8\mathrm{.}10$Variable manufacturing overhead$ $1\mathrm{.}10$Supervisor's salary$ $2\mathrm{.}00$Depreciation of special equipment$ $4\mathrm{.}20$Allocated general overhead$ $2\mathrm{.}10$

An outside supplier has offered to make and sell the part to the company for $$21\mathrm{.}20$ each. If this offer is accepted, the supervisor's salary and all of the variable costs, including direct labor, can be avoided. The special equipment used to make the part was purchased many years ago and has no salvage value or other use. The allocated general overhead represents fixed costs of the entire company. If the outside supplier's offer were accepted, only $$2,000$ of these allocated general overhead costs would be avoided. In addition, the space used to produce part G$25$ would be used to make more of one of the company's other products, generating an additional segment margin of $$16,000$ per year for that product.

The annual financial advantage $($disadvantage$)$ for the company as a result of buying part G$25$ from the outside supplier should be:

Question $11$ options:

$($$$8,400)$

$$16,000$

$($$$8,000)$

$($$$40,000)$