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Chapman Corporation manufactures lamps. Management is currently studying whether the company should continue to make the cord assembly or purchase them from Palin Company for

Chapman Corporation manufactures lamps. Management is currently studying whether the company should continue to make the cord assembly or purchase them from Palin Company for $5.25. Chapman needs 20,000 cord assemblies a year. If the part is purchased, the company can not use the released facilities for another manufacturing activity. Chapmanā€™s unit cost to manufacture the cord assembly is:
Direct materials $2.25
Direct labor 1.75
Factory overhead (70% fixed) 2.50
Total $6.50

Required: what is The decision Chapman should make and the related differential income.

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