Kingston Inc. needs 10,000 units of an electronic part to be used in production. If the company buys the part from Burlington Company instead of making it, Kingston could not use the present facilities for another manufacturing activity. The purchase price of the part is $53 per unit. Sixty percent (60%) of the fixed overhead applied will continue regardless of what decision is made. The following quantitative information is available regarding the unit cost to Kingston to make the part:

Direct materials $7

Direct labor 24

Variable overhead 12

Fixed overhead applied 15

Total $58

Please answer the following questions. Justify your answers with computations.

1. In deciding whether to make or buy the part, what is Kingstons total relevant cost to make the part?

2. What alternative is more desirable for Kingston and by what amount?

3. If Kingston needs 5,000 units of the part, how will your answers in 1 and 2 be different? Why?