Outsourcing

Glass Tech manufactures fiberglass housings for portable generators. One part of the housing is a metal latch. Currently, the company produces the 124,000 metal latch units required annually. Company management is considering purchasing the latch from an external vendor. The following data are available for making the decision:

Cost per Unit to Manufacture
Direct material	$1.37
Direct labor	1.31
Variable overhead	0.73
Fixed overhead-applied	1.14
Total cost	$4.55

Cost per Unit to Purchase
Purchase price	$3.91
Freight charges	0.10
Total cost	$4.01

a. Assuming that all of Glass Tech