3.Sarasota Bicycles has been manufacturing its own wheels for its bikes. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labor cost. The direct materials and direct labor cost per unit to make the wheels are $3 and $3.6 respectively. Normal production is 200,000 wheels per year.

A supplier offers to make the wheels at a price of $8 each. The cost of make is