Exercise 5 Your Company makes 5000 units of a component part. At this level of activity, the cost per part is: Direct materials $3.00 Direct labor $4.00 $2.00 Fixed manufacturing overhead $6.00 Total cost per part $15.00 An outside supplier has offered to sell the parts to Your Co. for $12 each. If Your Co. accepts this offer, it will be able to increase production of another product and earn an additional $15000 profit. Of the fixed manufacturing overhead, 60% is allocated and 40% direct. Complete the following table to determine whether you should make or buy the part. Make Buy XX Direct materials Direct labor Variable manufacturing overhead Direct fixed manufacturing overhead Allocated fixed manufact. overhead Purchase price Opportunity cost Total cost xx x x x x x x XX XX What is the difference in cost? Should you make or buy the part