Company ABC is confronted with the decision whether to make or buy a key component used in the manufacture of its products. Marketing has estimated that 12,000 components are needed. Purchasing has determined that these components can be purchased from an outside supplier for $14.00 per component.

Cost accounting has associated the following costs with making these components:

Materials: $6.00 per unit

Direct Labor: $3.50 per unit

Manufacturing Overhead: $4.00 per unit

You discover that only $1.80 of the $4.00 manufacturing overhead cost relates to variable manufacturing overhead. The remaining $2.20 of the $4.00 represents existing fixed manufacturing overhead cost that has been arbitrarily allocated to the components, and is unavoidable regardless of the decision to make or buy.

You also discover, that in addition to the above information:

- buying the components would require hiring a temporary purchasing clerk to oversee purchasing documentation at a total cost of $6,000

- making the components would require leasing additional storage facilities at a total cost of $25,000

- buying the components would temporarily free up plant floor space that could be leased to a neighboring firm for $9,000.

Indicate if, quantitatively, Company ABC should make or buy the 12,000 components and indicate the differential profit of your recommendation.

Group of answer choices

Make: $4,400 Differential Profit

Buy: $22,000 Differential Profit

Make: $13,400 Differential Profit

Buy: $7,600 Differential Profit

Make: $22,400 Differential Profit