Directions: Answer the questions following the problem provided below. Show computations in good form to support your answers.

You are faced with a make or buy decision. The company currently makes a component for one of its products but is considering whether it should instead purchase the component. If the offer from an outside supplier were accepted, the company would no longer need to rent the machinery currently being used to manufacture the component. You realize that the annual rental cost is a fixed cost, but recall some sort of warning about fixed costs. Is the annual rental cost relevant to this make or buy decision?