2. Jonah Corp. is trying to decide whether to make or buy a component of the product it manufactures. Last year Jonahs machining department made 10,000 of the parts. Variable manufacturing costs per part were $10 direct materials, $5 direct labor, $1 indirect labor, and $1 utilities. Fixed manufacturing costs for the part were as follows:

Cost Item Depreciation $9,000

Property taxes $2,000

Insurance $3,000

Total $14,000

All fixed manufacturing costs for the part will be eliminated except for $6,000 allocated costs that will have to be absorbed by other departments. If the parts are purchased, Jonah will have to pay freight and inspection costs of $0.50 per part and annual receiving costs of $1,500 would be incurred by the machining department. Jonah could purchase 10,000 units of the part for $17.50 each. Should Jonah make or buy? What if buying the order freed up production capacity allowing Jonah to increase net income by $15,000.