Alanco, Incorporated manufactures a variety of products and is currently manufacturing all of its own component parts. An outside supplier has offered to sell one of those components to Alanco. The Controller has asked you to help evaluate this offer to determine if the company should make or buy the component.

Direct materials	$ 4.00
Direct labor	6.00
Variable manufacturing overhead	2.00
Fixed manufacturing overhead, traceable*	5.00
Fixed manufacturing overhead, common but allocated	8.00
Total cost	$ 25.00

Supplier price $21.00

Units used per year

* The fixed manufacturing overhead, traceable

Depreciation of equipment (no resale value)	30%
Supervisor salary	70%

Required:

Assuming the company has no alternative use for the facilities now being used to produce the component, complete the following analysis to determine if the outside supplier's offer should be accepted.

Based on this analysis, determine if Alanco should make or buy the component.