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ICG Aviation produces an executive jet for which it currently manufactures a flaperon control lever.
The company has an offer from Lars Levers Inc. to produce the required parts for $700 each. Lars is able to supple the 400 levers needed in the coming year. If ICG outsources the lever production to Lars, supervisors from the production units will be reassigned to other areas needing their services (ICG would not hire additional supervisors if these supervisors were not available). The equipment cannot be used elsewhere in the company, and it has no resale value. However, the space occupied by the production of the levers can be used by another production group that is currently leasing space for $25,000 per year.