Cardinal Co. needs 20,000 units of a certain part to use in one of its products. The following information is available.

Cost to Cardinal to make each part:

The cost to buy the part from the Oriole Co. is £36. If Cardinal buys the part from Oriole instead of making it, Cardinal would have no use for the spare capacity. Additionally, 60% of the fixed manu¬ facturing overheads would continue regardless of what decision is made. Cardinal decides that direct labour is an avoidable cost for the purposes of this decision.

Decide whether to make or buy the 20,000 parts, by comparing the relevant costs.

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Direct materials Direct labour Variable manufacturing overhead Fixed manufacturing overhead Total 4 16 8 10 38