The key to the decision lies in the investigation of those relevant costs that change between the make- or-buy alternatives. Assuming that the productive capacity will be idle if not used to produce the subassembly, the analysis takes the following form: Total of Purchase price Direct materials Direct labor Variable overhead Fixed overhead that can be avoided by not making Total relevant costs Difference in favor of making Make $2 BUY $16 Make $ 40,000 $ 32,000 $ 32,000 Units BUY $128,000 The make-or-buy decision must be investigated, along with the broader perspective of considering how best to utilize available facilities. The alternatives are: 2. 3. Leaving facilities idle Buying the parts and renting out idle facilities Buying the parts and using idle facilities for other products