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Howard can produce 100 units of a component part with the following costs: Direct Materials $22000 Direct Labor 6000 Variable Overhead 19500 Fixed Overhead 16000

Howard can produce 100 units of a component part with the following costs:

Direct Materials	$22000
Direct Labor	6000
Variable Overhead	19500
Fixed Overhead	16000

If Howard can purchase the component part externally for $56000 and only $4000 of the fixed costs can be avoided, what is the correct make-or-buy decision?

Make and save $4500

Buy and save $3500

Make and save $3500

Buy and save $8500

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