Make or Buy Terry Incorporated manufactures machine parts for aircraft engines. CEO Bucky Walters is considering an offer from a subcontractor to provide $2,000$ units of product OP$89$ for $$120,000.$ If Terry does not purchase these parts from the subcontractor, it must continue to produce them in$-$house with these costs:

Cost per Unit

Direct materials $ $28$

Direct labor $18$

Variable overhead $16$

Allocated fixed overhead $4$

Required:

$1.$ What is the relevant cost per unit to make the product internally?

$2.$ What is the estimated increase or decrease in short$-$term operating profit of producing the product internally versus purchasing the product from a supplier?