Exercise 7-2 Make or Buy Nesbo Corp. manufactures its own component parts. The following per unit costs were incurred in the manufacture of 18,000 units of part R02: Direct materials Direct labour Variable overhead Fixed overhead $ 12 35 14 20 $81 An external supplier has offered to sell 18,000 units of part R02 to Nesbo for $80 per unit If Nesbo accepts the offer, $7 per unit of the fixed overhead could be eliminated, at the current volume. In addition, the facilities used to produce part R02 could be utilized to expand the capacity of Part R03 resulting in an increase in the sales of R03 of 20%. The most current income statement for part R03 is as follows: Sales Variable costs Fixed costs Operating income Required - a. b. $560,000 330,000 140,000 $90,000 Calculate the incremental income to the company if the supplier's offer is accepted. Should the external supplier's offer be accepted? At what volume would the company be indifferent if part R02 is produced internally or purchased externally