Futura Company purchases the 63,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $11.80 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the companys chief engineer is opposed to making the starters because the production cost per unit is $12.10 as shown below:

	Per Unit	Total
Direct materials	$ 6.00
Direct labor	2.20
Supervision	1.90	$ 119,700
Depreciation	1.00	$ 63,000
Variable manufacturing overhead	0.60
Rent	0.40	$ 25,200
Total product cost	$ 12.10