Braholl manufacturing company inc currently manufactures a component used in one of its products. The annual production costs for 10,000 components are as follows: Material cost : $5 per unit Labor cost: $4 per unit Overhead: $1 per unit Batch level set up costs for year $5,000 Product level managers salary: $18,000 Allocated facility level costs : $12,000 An outside company has offered to supply 10,000 units of component for $12.50 each. If Bryan Manufacturing outsources the component, it will be able to rent out the idle factory space for 1,000 but will not terminate the product manager.

Required

1. Which items are not relevant to this outsourcing decision

2. Identify any opportunity costs associated with this decision

3. Prepare a quantitative analysis that indicates whether the component should be outsourced.