Harper Company incurs a total cost of $252,000 in producing 20,000 units of a component needed in the assembly of its major product. The component can be purchased from an outside supplier for $7 per unit. A related cost study indicates that the total cost of the component includes fixed costs equal to 75% of the variable costs involved.

a. ShouldHarper buy the component if it cannot otherwise use the released capacity? Present your answer in the form of differential analysis.

b. What would be your answer to requirement (a) if the released capacity could be used in a project that would generate $5,000 of contribution margin?