22 . Make- or Buy Decision , Coffee Mugs , Inc . currently manufactures ceramic coffee mugs . Management is interested in outsourcing production to a reputable manufacturing company that can supply the cups for 52 per unit Coffee Mugs produces 109 600 mugs each year . Variable production costs are 50 60 and annual fixed costs are $150 050 if production is outsourced all variable costs and so percent of annual fixed costs will be eliminated Perform differential analysis using the format presented in and explain which alternative is best Alternative i producing internally , or Alternative 2 ( outsourcing )