Cruise Company produces a part that is used in the manufacture of one of its products. The unit manufacturing costs of this part, assuming a production level of 6500 units, are as follows:

Direct materials$4.00Direct labor$4.00Variable manufacturing overhead$3.50Fixed manufacturing overhead$1.50Total cost$13.00The fixed overhead costs are unavoidable.

Assuming Cruise Company can purchase 6500 units of the part from Suri Company for $14.00 each, and the facilities currently used to make the part could be rented out to another manufacturer for $25,000 a year, what should Cruise Company do?

A)

Make the part and save $12.50 per unit.

B)

Buy the part and save $1.35 per unit. How is it 1.35 and not 1.00?

C)

Make the part and save $6.00 per unit.

D)

Buy the part and save $1.00 per unit.