1. Outsourcing Decision

Off Their Rockers, Inc. currently manufactures the rocking chairs they sell in their stores. The CEO was recently approached with an offer to buy the rockers from another supplier for $150/each. The company currently has the following costs associated with manufacturing the rocking chairs:

Unit-level material cost $40

Unit-level labor cost $30

Unit-level overhead cost $16

Batch-level cost (100 per batch) $150

Product-level supervisor salary $50,000

Allocated facility level cost $80,000

Assume the company has demand for 2000 rockers. What are the relevant costs in the outsourcing decision?

Should Off Their Rockers buy or make the rocking chairs? (show rationale)