3. Make or buy: Wintelevision, Inc. is a gaming system manufacturer. Each month, the firm produces 40,000 memory chips, each of which are then used in the assembly of each gaming system. The per unit cost for Wintelevision to produce each memory chip is as follows:

Direct materials $11.40 Direct labor $3.75 Variable OH $2.95 Fixed OH $5.80 Total manufacturing costs $23.90

Wintelevision can also purchase the memory chip from an outside supplier, Y-cron, for $22.75 per memory chip. If the memory chip is purchased from Y-cron, 75% of the total fixed OH costs incurred in producing the memory chip can be avoided. Also, assume that DM and DL are variable costs, and all variable costs could be avoided if Wintelevision buys the memory chip from Y-cron.

Calculate the financial advantage (disadvantage) for the company as a result of buying the memory chip from Y-cron. You must show all of your work.