Answer question 1 to 4

Information: Talmadge Company produces 100,000 units of Part 34B, used in one of its snow-blower engines, each year. An outside supplier has offered to supply the part for $4.75. The unit cost is: Direct materials $0.50 Direct labor 2,40 Variable overhead (power) 0.90 Fixed overhead 1.05 Total unit cost $4.85 Overhead is applied on the basis of machine hours; Part 34B requires 30,000 machine hours per year. Why: The make-or-buy situation requires the company to focus on relevant costs and benefits. The problem is set up with relevant costs and benefits organized under col- umn headings for each alternative. The difference between the alternatives gives the quantitative advantage or disadvantage for each alternative. Required: 1. What are the alternatives for Talmadge Company? 2. Assume that none of the fixed cost is avoidable. List the relevant cost(s) of internal production and of external purchase. 3. Which alternative is more cost effective and by how much? 4. What if $60,000 of fixed overhead is supervision for Part 34B that is avoided if the part is purchased? Which alternative is more cost effective and by how much