Darim Company is currently manufacturing Part FEA-10, producing 15,000 units annually. The part is used in the production of several products made by Darim. The cost per unit for FEA-10 is as follows:
Direct materials ....$70.00
Direct labor ......20.00
Variable overhead ....3.00
Fixed overhead .....1.50
Total ........$94.50
Of the total fixed overhead assigned to FEA-10, $12,000 is direct fixed overhead (the annual lease cost of machinery used to manufacture Part FEA-10), and the remainder is common fixed overhead. An outside supplier has offered to sell the part to Darim for $94. There is no alternative use for the facilities currently used to produce the part. No significant non-unit-based overhead costs are incurred.
Required:
1. Should Darim Company make or buy Part FEA-10?
2. What is the maximum amount per unit that Darim would be willing to pay to an outside supplier?