1. The information below are provided by J & M manufacturing, a producer of baby toys. The costs per unit are as follows:

Direct materials $10.00

Direct labor 20.00

Variable overhead 15.00

Fixed overhead 18.00

Total $63.00

The manager of LMK has contacted J & M with an offer to sell 15,000 of the subassemblies for $48.00 each. J & M will not be able to eliminate $150,000 of fixed overhead if it accepts the proposal.

a. What is the total relevant costs to J & M?

b. Should LMK make or buy the toys? What is the difference between the two options?