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The external purchase price is $50 for a part that can be manufactured for $41 per unit; the $41 manufacturing cost includes

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Answer #1

Relevant costs to produce = $41 per unit - $8 allocated fixed overhead per unit

= $33 per unit

Savings = External purchase price per unit - Relevant cost to produce per unit

= $50 per unit - $33 per unit

= $17 per unit

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