Relevant costs in the make-or-buy decision Tanner Appliance Company manu¬

factures 12,000 units of part M4 annually. The part is used in the production of one of its principal products. The following unit cost information is available on part M4.

A potential supplier has offered to manufacture this part for Tanner Appliance for $30 per unit. If Tanner Appliance outsources the production of part M4, 50% of batch-related and 80% of product-sustaining activity resources can be elimi¬ nated. Furthermore, the production facility now being used to produce this part can be used for a fast-growing new product line that would otherwise require the use of a neighboring facility at a rental cost of $20,000 per year. Should Tanner Appliance purchase part M4 from the outside supplier? What costs are relevant for this decision? What additional factors should Tanner consider?
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Direct materials Direct labor Unit-related support Batch-related support Product-sustaining support Facility-sustaining support Allocated corporate support Total costs $11 9 4 |GINNGA $38