1. Meltzer Corporation is presently making part O13 that is usedin one of its pr

1. Meltzer Corporation is presently making part O13 that is usedin one of its products. A total of 3000 units of this part areproduced and used every year. The companys Accounting Departmentreports the following costs of producing the part at this level ofactivity:An outside supplier has offered to produce and sell the part to thecompany for $27.00 each. If this offer is accepted thesupervisors salary and all of the variable costs including directlabor can be avoided. The special equipment used to make the partwas purchased many years ago and has no salvage value or other use.The allocated general overhead represents fixed costs of the entirecompany. If the outside suppliers offer were accepted only $3000of these allocated general overhead costs would be avoided.If management decides to buy part O13 from the outside supplierrather than to continue making the part what would be the annualimpact on the companys overall net operating income?

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