Kane company is considering outsourcing a key component. A reliable supploer has quoted a price of 64.50 per unit. The following costs of component when manufactured in house are expressed on a per unit basis:

Direct material 23.40

Direct Labor 16.10

Variable Overhead 26.70

Fixed Overhead 6.90

total cost 73.10

a.) What assumption need to be made about the behavior of overhead costs for Kane in order to analyze the outsourcing decision?

b.) Should Kane company outsource the component? Yes or no Why?

c.) What other factors are relevent to this decision? Yes or No Why?