Calvin Company manufactures its own subassembly units known by the code name "ekrob." Calvin incurs the following annual costs in producing 40,000 ekrobs:
Direct materials	$ 60,000
Direct labor	90,000
Variable overhead	50,000
Fixed overhead	80,000
Total	$280.000

Calvin can purchase the ekrobs from Hobbes Corporation for $6.00 per unit. If they purchase the ekrobs, only $30,000 of the fixed overhead will be eliminated. However, the vacant factory space can be used to increase production of another product, which would generate annual income of $22,000.

Instructions

Prepare an incremental analysis to determine whether Calvin should make or buy ekrobs.