In the following scenario of a vacuum manufacturer, should the manufacturer produce or buy engines from a third party? Explain your approach to the problem, perform relevant calculations and analysis, and formulate a recommendation. Ensure your work and recommendation are thoroughly supported.

The manufacturer has prepared the following cost data for manufacturing one of its engine components based on the annual production of 50,000 units.

Description	Cost per Month
Direct Materials	$75,000
Direct Labor	$100,000
Total	$175,000

In addition, variable factory overhead is applied at $7.50 per unit. Fixed factory overhead is applied at 150% of direct labor cost per unit. The vacuums sell for $150 each.

The third party has offered to make the engines for $60 per unit. 75% of fixed factory overhead, which represents executive salaries, rent, depreciation, and taxes, continue regardless of the decision. Should the company make or buy the engines?