Make-or-BuyDecision.Wheels,Inc.,currentlymanufacturesitsowncustomrimsforautomobiles.Managementisinterestedinoutsourcingproductionoftheserimstoareputablemanufacturingcompanythatcansupplytherimsfor$80perunit.Wheels,Inc.,incursthefollowingannualproductioncoststoproduce10,000rimsinternally.

Total Annual Cost at Per Unit 10,000 Units Variable production costs Direct materials $20 $200,000 Direct labor 10 100,000 Manufacturing overhead 30 300,000 Fixed production costs Factory building and equipment lease 70,000 Factory insurance 50,000 Production supervisor's salary 100,000 Total production costs $820,000