Assume that direct labor is a variable cost. Of the fixed manufacturing overhead, 25% is avoidable if the component were bought from the outside supplier. In addition, making the component uses 3 minutes on the machine that is the company's current constraint. If the component were bought, time would be freed up for use on another product that requires 6 minutes on this machine and that has a contribution margin of $5.40 per unit. When deciding whether to make or buy the component, what cost of making the component should be compared to the price of buying the component? (Round your intermediate calculations to 2 decimal places.)

Multiple Choice $20.45 per unit $17.75 per unit $22.50 per unit $23.30 per unit