Columbia Manufacturing incurs unit costs of $15 ($9 variable and $6 fixed) in making a subassembly part for its finished product. A supplier offers to make 10,000 of the assembly part at $11 per unit. If the offer is accepted, all variable costs and $1 of fixed costs per unit will be saved.

Instructions

1. Prepare an analysis to show whether Columbia Manufacturing should make or buy the assembly part.

2. Would your answer be different if Columbia could earn $25,000 of income with the facilities currently used to make the part?