(Make-or-buy decision) Edson Automotive Accessories produces bumpers for pickup trucks, which are sold on a wholesale basis to new-car retailers. The average sales price of a bumper is $75. Normal annual sales volume is 50,000 units, which is maximum production capacity. At this capacity, the company’s costs per unit are as follows:

A key component in the production of bumpers is the mounting hardware that is used to attach the bumpers to the vehicles. Luhr’s Metal Stamping has offered to sell Edson as many mounting units as the company needs for its bumper production. The offering price is $8 per unit. If Edson accepts the offer, the released facilities (that are used to produce mounting hardware) could be used to produce an additional 2,400 bumpers. What alternative is more desirable and by what amount? [Assume the company is currently operating at its capacity of 50,000 units.]LO1

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Direct material Direct labor Overhead (2/3 is fixed) Total $28 (including mounting hardware, which is $6 per unit) 8 18 $54