Make or Buy

Blasingham Company is currently manufacturing Part Q108, producing 35,000 units annually. The part is used in the production of several products made by Blasingham. The cost per unit for Q108 is as follows:

Direct materials$ 6.00Direct labor2.00Variable overhead1.50Fixed overhead3.50Total$13.00

All of the fixed overhead is common fixed overhead. An outside supplier has offered to sell the part to Blasingham for $11. There is no alternative use for the facilities currently used to produce the part.

Required:

1.Conceptual Connection: Should Blasingham Company make or buy Part Q108?

2.What is the most Blasingham would be willing to pay an outside supplier? If required, round your answer to the nearest cent.

$per unit

3.If Blasingham buys the part, by how much will income increase or decrease?

by $