Leesburg Auto Company produces a small part that in uses in the production of it

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Leesburg Auto Company produces a small part that in uses in the production of its automobiles. The company's unit product cost for the part, based on a production of 60,000 parts per year, as follows: Per part Total Direct Materials $5.00 Direct Labor 3.00 Variable Manufacturing Overhead 0.50 Fixed Manufacturing Overhead, Traceable 3.00 $180,000 Fixed Manufacturing Overhead, Common (allocated on basis of labor hours) 2.25 $135,000 Unit Product Cost $13.75 An outside supplier has offered to supply parts to the Leesburg Auto Company for only $12.00 per part. Fifty percent of the traceable fixed manufacturing costs consist of depreciation and special equipment that has no resale value. The decision to buy parts from the outside supplier would have no effect on the common fixed costs of the company, and the space being used to produce the parts would otherwise be idle. Ignore the impact of income taxes in your calculation. How much would profits increase or decrease as a result of purchasing the parts from the outside supplier rather than making them inside the company?

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