You are given the following cost information for producing 10,000 units in LL company: direct material – $70,000, direct labour= 10,000; variable manufacturing overhead 50,000. Fixed manufacturing ove

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You are given the following cost information for producing 10,000 units in LL company: direct material – $70,000, direct labour= 10,000; variable manufacturing overhead 50,000. Fixed manufacturing overhead for the year – $300,000

LL company received an offer from a supplier to manufacture the 10,000 units for $39, for the same quality. LL company can $4,000 extra net income from it. 60% of the fixed manufacturing overhead cost is avoidable if LL buys from a supplier. In case LL company decides to buy from a supplier, and use the capacity in making another product, then it will make ________________ cost savings (i.e the difference between total relevant cost of making and that of buying)

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