1. Talk Company manufactures 10,000 telephones per year. The full manufacturing costs per telephone are as follows: Direct materials Direct labor Variable manufacturing overhead Average fixed manufacturing overhead Total The Telecom America has offered to sell Talk Company 10,000 telephones for $34 per unit. If Talk Company accepts the offer, $25,000 of fixed overhead will be eliminated. Applying differential analysis to the situation, should Talk Company make or buy the phones? Answer: Relevant cost to make the telephones: Direct materials L x $4) Direct labor x$16) Variable overhead x $10) Fixed overhead Total cost to make Cost to buy x $34) Savings from making