Hextall Manufacturing had always made its raised endcaps in-house. However, Fuhr Metal Fabricating had recently offered to supply one raised endcap, TM-27, at a price of $29.00 each. Hextall uses 27,000 units of raised endcap TM-27 each year. The cost per unit of this raised endcap is as follows: Direct materials $ 15.00 Direct labour $ 9.25 Variable overhead $ 5.50 Fixed overhead $ 3.00 Total $ 32.75 The fixed overhead is an allocated expense; none of it would be eliminated if production of raised endcap TM-27 is stopped.

1. What is the total relevant cost per unit to buy the raised endcap

2. If Hextall decides to purchase the raised endcap, will operating income increase, decrease, or stay the same?

3. If Hextall decides to purchase the raised endcap, how much will operating income change by?

4. Assume that 75 percent of Hextall Manufacturing's fixed overhead for raised endcap TM-27 would be eliminated if that raised endcap were no longer produced. If the company decides to purchase the raised endcap from their supplier, will operating income increase, decrease, or stay the same?