ABC Company makes 40,000 units per year of a part it uses in the products...

Name: ABC Company makes 40,000 units per year of a part it uses in
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Accounting

ABC Company makes 40,000 units per year of a part it uses in the products it manufactures. The per unit product cost of this part is shown below: direct materials .............. $15.30 direct labor .................. 27.40 variable overhead ............. 2.10 fixed overhead ................ 24.70 total ......................... $69.50 An outside supplier has offered to sell ABC Company 40,000 units of this part a year for $66.10 per unit. If ABC Company accepts this offer, the facilities now being used to make this part could be used to make more units of a product that is in high demand. The additional contribution margin that could be earned on this other product would be $100,000 per year. If ABC Company accepts the outside supplier's offer, $21.90 of the fixed overhead cost being applied to the part would be eliminated. The remaining amount would continue to be incurred and would be allocated to the company's remaining products. Calculate the increase in company profits if ABC Company accepts the outside suppliers offer.

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