Make-or-Buy Decision Arches Manufacturing had always made its components in-house. However, Canyonlands Component Works had recently offered to supply one component, DA, at a price of $12 each. Arches uses 4,700 units of component DA each year. The cost per unit of this component is as follows: Direct materials $7.30 Direct labor Variable overhead Fixed overhead Total 2.65 1.51 4.00 $15.46 The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? Make the component in-house or to buy it from Canyonlands 2. List the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost Make Buy Differential Cost to Make per unit per unit per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the component in house)? Decrease 3. Conceptual Connection: Which.alternative.is.better? Check My Work Next Total $15.46 The fixed overhead is an allocated expense; none of it would be eliminated if production of component DA stopped. Required: 1. What are the alternatives facing Arches Manufacturing with respect to production of component DA? Make the component in-house or to buy it from Canyonlands 2. List the relevant costs for each alternative. If required, round your answers to the nearest cent. Make Buy Differential Cost to Make Total Relevant Cost per unit per unit per unit If Arches decides to purchase the component from Canyonlands, by how much will operating income increase or decrease (as compared to making the component in- house)? Decrease 3. Conceptual Connection: Which alternative is better? Make Feedback Check My Work Relevant costs are future costs and differ across alternatives. Determine relevant costs for both alternatives. Set up four columns. First column lists all costs. Second and third column are for alternatives, make or buy and list all amounts. Fourth column is the differential cost to make