Bonneville Company is producing a subassembly used in the production of a product. The costs incurred for the subassembly follow:

Per Unit

Direct materials $ 6.00

Direct labor 4.00

Variable factory overhead 1.00

Fixed supervisor salary 3.00

Depreciation expense on factory equipment 2.00

General fixed factory overhead allocated 5.00

Total costs $21.00

The above per unit costs are based on 8,000 units. An outside supplier will provide 8,000 subassemblies for $19 per unit. The supervisor will be terminated if the subassemblies are not produced in house. The idle factory will be used to manufacture another product with a contribution margin of $60,000.

Requirements:

1. What should Bonneville do? Explain your decision in detail. Show all calculations.

2. What other factors should Bonneville consider?