Parsons Plumbing & Heating manufactures thermostats that it uses in several of its products. Management is considering whether to continue manufacturing the thermostats or to buy them from an outside source. The following information is available:

1.	The company needs 80,000 thermostats per year. Thermostats can be purchased from an outside supplier at a cost of $6 per unit.
2.	The cost of manufacturing thermostats is $7.50 per unit, computed as follows:

Direct materials	$	156,000
Direct labor		132,000
Manufacturing overhead:
Variable		168,000
Fixed		144,000
Total manufacturing costs	$	600,000
Cost per unit ($600,000