In this make or buy problem, you should compute the total cost of making a particular part and the total costs of buying the same part. Try following the solutions steps: 1. Determine the parameters of the make cost function - the variable costs per unit and the fixed costs. 2. Determine the fixed costs that are avoidable and the fixed costs that are unavoidable. 3. Determine the buy price. 4. Determine the alternative use of the idle resources under the buy, Note that the question does not ask for the total make costs and the total buy costs but instead asks for the difference between the two. Make sure that you round your unit cost computations as instructed and that you submit the answer as a positive or a negative number as instructed. Lynn Hart is a managerial accountant at Paibec Corporation. Paibec is under intense cost competition, and Hart has been asked to evaluate whether Paibec should continue to manufacture part MT - RF or purchase it from Marley Company. Marley has submitted a bid to supply the 35,000 MT - RF units that Paibec will need for 2015 at a price of $16.00 each. Paibec has capacity available to produce the 35,000 units. From plant records and interviews with John Porter, the plant manager, Hart gathered the following information regarding Paibec's costs to manufacture 31,000 units of MT-RE in 2014: Additionally, Porter tells her: Variable costs per unit in 2015 will be the same as variable costs per unit in 2014. If MT - RF is purchased from Marley, plant space will not have to be rented, and equipment will not have to be leased. But these are annual contracts that are going to be expensive to wiggle out of. Porter estimates it will cost $9,000 to terminate the plant rental contract and $ 5,000 to terminate the equipment lease contract. 40% of the Other overhead is variable. The rest is fixed and is expected to remain the same whether MT - RF is manufactured by Paibec or outsourced to Marley. Hart is aware that cost studies can be threatening to current employees because the findings may lead to reorganizations and layoffs. She knows that Porter is concerned that outsourcing MT - RF will result in some of his close friends being laid off. Therefore, she performs her own independent analysis of competitive and other economic data, which reveals that: Direct materials and direct labor wage rates are likely to be higher by 7% and 3%, respectively, in 2015 compared to 2014. Paibec can actually save $20,000 of the fixed portion of Mother overhead costs if MT - RF is purchased from Marley. REQUIRED [NOTE: ROUND UNIT COST COMPUTATIONS TO THREE DECIMAL PLACES.] Based on Hart's estimates, by how much will Paibec's profits change if MT - RF is purchased from Marley? (Note: If the buy costs are less than the make costs, enter the difference as a positive number.)