ABC Company manufactured $6,000$ units of a component part

that is used in its product and incurred the following costs:

Another company has offered to sell the same component part to

the company for $$22$ per unit. If the ABC Company accepts this

offer, all variable manufacturing costs will be eliminated, but

only the $$15,000$ of fixed manufacturing overhead costs will be

eliminated. If the component part is purchased from the outside

firm, ABC Company has the opportunity to use the factory

equipment to produce another product which is estimated to

have a contribution margin of $$30,000.$

Instructions

a$)$ Prepare an incremental analysis report for ABC Company

which can serve as informational input into this make$-$or$-$

buy decision.

b$)$ Should ABC Company buy the products from the outside

supplier? Justify your answer.

c$)$ What are the qualitative factors that ABC will have to

consider when making this decision?