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Mcfarlain Corporation is presently making part U98 that is used in one of its products....

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Accounting

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Mcfarlain Corporation is presently making part U98 that is used in one of its products. A total of 8,000 units of this part are produced and used every year. The company's Accounting Department reports the following costs of producing the part at this level of activity. Direct naterials Direct labor Variable overhead Supervisor's salary Depreciation of special equipment Allocated general overhead Unit $2.50 $4.90 $1.90 $5.40 5.se $5.60 An outside supplier has offered to produce and sell the part to the company for $23.40 each. If this offer is accepted, the supervisors salary and all of the other use, The allocated general overheed represents fixed costs of the entire company, none of which would be avoided it the part were purchased instead of produced internally In addition to the facts given above, assume that the space used to produce pert U98 could be used to make more of one of the company's other products, generating an additional segment margin of $18,800 per year for thet product. What would be the financial advantage (disedventage) of buying part U98 from the outside supplier and using the freed space to make more of the other product

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