Hernandez, Inc. manufactures three models of picture frames for a total of $8,000$ frames per year. The unit cost to produce a metal frame follows:

Direct materials

Direct labor

Variable overhead

Fixed overhead $($based on $8,000$ units$)(70\%$ unavoidable$)$

A local company has offered to supply Hernandez the $8,000$ metal frames it needs for $$18$ each.

$($a$)$ Prepare an analysis for this make or buy decision.

$($b$)$ What should Hernandez do$?$

Explain.

c$)$ If Hernandez buys the product from an outside supplier, it can generate an income of $$20,000$ from the released productive capacity used to make the product. How does this financially affect your analysis from a$?$