Buzz Telephone Company manufactures landline telephones. Buzz currently buys a connector for its phones for \(\$ 1.80\) per unit. Buzz's president asked for cost estimates for making this product and received this report.

If Buzz makes the connector, production would take place in its machine shop. No additional plant and equipment would be necessary; however, the company would have to hire someone to inspect the connectors before they could be used in producing the company's other products. The inspector's salary would be \(\$ 15000\) per year.
Required:
a Calculate the incremental costs of making and of buying the connector in quantities of 40000 units per year. Should the company make the connector or buy it?
b Calculate the incremental costs of making and of buying the component in quantities of 20000 units per year. Should the company make the component or buy it?
c How many units of the component would have to be produced so that the total costs of making them would be equal to the total costs of buying them?

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Costs per unit of making connectors Direct materials Direct labour Variable overhead Fixed overhead Total manufacturing cost per unit $0.75 0.30 0.35 0.80 $2.20