In the production of its extreme fifth wheel trailer and heavy duty travel trailer, Jayco RV uses 1,000 units of Part No. XLT765 each month. The cost to manufacture one unit of XLT765 is presented as follows:
Direct Materials	$200
Materials handling (10% of materials cost)	20
Direct labor	180
Manufacturing overhead (150% of direct labor cost)	270
Total Manufacturing Cost	$670
Materials handling, which is not included in manufacturing overhead, represents the direct variable costs of the receiving department that are applied to direct materials and purchased components on the basis of their cost. Jayco RV's annual manufacturing overhead budget is one-third variable and two-thirds fixed. Kohree Castings, one of Jayco RV's reliable vendors, has offered to supply XLT765 at a unit price of $500
1. If Jayco RV purchases the 1,000 XLT765 units from Kohree Castings, the capacity Jayco RV used to manufacture these parts would be idle. Should Jayco RV make or buy the component? What is the cost difference per unit to buy the part?
2. Assume Jayco RV is able to rent out the area used to produce the part for $80,000 per month. If Jayco RV decides to purchase the 1,000 units from Kohree Castings, what would be the change to Jayco RV's monthly cost for XLT765?
3. Assume the rental opportunity does not exist. What is the maximum price Jayco RV would be willing to pay Kohree Castings if Jayco RV requires a $10,000 savings a month before buying from an outside vendor?