XYZ Industries manufactures 24,000 components per year. The total manufacturing costs for this level of production were determined as follows:
Direct Materials $122,000
Direct Labor $180,000
Variable manufacturing overhead $45,000
Fixed manufacturing overhead $74,000
An outside supplier has offered to produce all 24,000 units of the component and sell it to XYZ for $17 per unit.
Additional information:
If XYZ purchases the component from the outside supplier, the manufacturing facilities would be unused and could be rented out for $72,000 per year.XYZ has determined that no fixed manufacturing overhead could be avoided by purchasing the component from the supplier.What is the total annual financial impact of purchasing the component from the supplier instead of manufacturing it themselves?(Make sure to calculate the total impact, not the per-unit amount. Use a negative number to indicate a reduction in cash flows.)