Andrea Company manufactures a part for its production cycle. The annual costs per unit for 20,000 units of this part are as follows:

Direct materials- 15

Direct labor- 12

Variable indirect production costs-19

Fixed indirect production costs-16

Total cost-$62

Andrea Company has been approached by a supplier who will sell 20,000 units of the same part for $940,000. All the fixed indirect production costs are unavoidable if Andrea Company ceases production of the part. Required: A) Assuming there is no alternative use for the facilities, should Andrea Company buy or make the part? B) Assume the facilities can be rented out for $100,000 per year. Should Andrea Company buy the part? If so, how much money will be saved?

4) Lorna Corporation has determined the contribution margin ratio is 35% and the income tax rate is 40%. Required: A) Assume break-even volume in dollars is $1,500,000. What are total fixed costs? B) Assume Lorna Corporation wants after-tax net income of $300,000. What volume of sales in dollars is necessary to achieve this net income?