erry Inc. manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide 2,000 units of product OP89 for $108,000. If Terry does not purchase these parts from the subcontractor, it must continue to produce them in-house with these costs: Cost per Unit Direct materials $ 27 Direct labor 16 Variable overhead 14 Allocated fixed overhead 6 Required: 1. What is the relevant cost per unit to make the product internally? 2. What is the estimated increase or decrease in short-term operating profit of producing the product internally versus purchasing the product from a supplier?
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