BibBoy Toy Company manufactures wagons for distribution through discount outlets, catalog sales companies, and other outlets. One wagon part is purchased from an outside firm for $6 per unit. The company uses 22.000 of these items each year. The production manager states that the company could manufacture the part for less than $6 per unit. As accountant, explain the computations you would make in advising management whether it should continue to buy the part or manufacture it.

LO.1