Bob Industries currently manufactures Part ABC for its main product. The costs per unit are as follows:

Direct materials $40.00

Direct labor 30.00

Variable overhead 42.00

Fixed overhead 33.00

Total $145.00

Mountaineer Industries has contacted Bobcat with an offer to sell 8,000 of the part for $120.00 each. Bobcat will eliminate $60,000 of fixed overhead if it accepts the proposal. Should Bobcat make or buy the part? What is the difference between the two alternatives?

Possible Answers:

48,000 cheaper to buy the product

$12,000 cheaper to make the product

$12,000 cheaper to buy the product

$48,000 cheaper to make the product