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Robin Company currently produces 8,000 units of part B13. Current costs for part B13 are as follows:

Direct materials $12
Direct labor 9
Factory rent 7
Administrative 10
General factory overhead 7
Total $45

If the company decides to buy part B13, 50% of the administrative costs would be avoided. All of the Robin Company items, including part B13, are manufactured in the same rented production facility. The company has an offer from a wholesaler that wishes to sell the part to Robin for $31 per unit. What effect will occur if the company decides to accept the offer?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M968973

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