Make-or-Buy Decision

LaSalle Manufacturing had always made its components in-house. However, Jasper Component Works had recently offered to supply one component, C-430, at a price of $12 each. LaSalle uses 4,100 units of Component C-430 each year. The cost per unit of this component is as follows:

Direct materials	$7.18
Direct labor	2.12
Variable overhead	1.82
Fixed overhead	2.00
Total	$13.12

The fixed overhead is an allocated expense; none of it would be eliminated if production of Component C-430 stopped.

Required:

1. List the relevant costs for each alternative. If required, round your answers to two decimal places.

	Total Relevant Cost
Make	$_____________per unit
Buy	$_____________per unit
Differential Cost to Make	$_____________per unit

If LaSalle decides to purchase the component from Jasper, by how much will operating income increase or decrease? $_________

2. Conceptual Connection: Which alternative is better? make/buy