First

Company manufactures gear model G37, which is used in several of its farm-equipment products. Annualproduction volume of G37 is

10,000

units. Unit costs for G37 are as follows:

Direct materials costs	$65
Direct labor costs	25
Variable overhead costs	20
Fixed overhead costs	19
Total costs	$129

Alternatively,

First

can purchase gear model G37 from an outside supplier for

$120

per unit. If G37 is outsourced,

First

can use the facility where G37 is currently manufactured for production of another gear-model G49. This would save

First

$110,000

in facility rental and other costs presently incurred.

Requirement

Should

First

make or buy G37? By how much will

First

be better off by choosing your decision rather than the alternative?

Should

First

make or buy G37? By how much will

First

be better off by choosing your decision rather than the alternative?

Complete the following analysis of the cost to purchase the gear model G37. (Use a parentheses or minus sign to show a net additional cost of purchasing the G37. Leave unused cells blank.)

Item	Relevant amount
Savings:
Additional costs:
	Total savings (additional costs)