Problem:
Manson Industries incurs unit costs of $7.10 ($4.14 variable and $2.96 fixed) in making a subassembly part for its finished product. A supplier offers to make 11,000 of the assembly part at $4.86 per unit. If the offer is accepted, Manson will save all variable costs but no fixed costs.
Required:
Question: Prepare an analysis showing the total cost saving, if any, Manson will realize by buying the part.
Note: Please show the work not just the answer.