1. Preston Industries, Inc. currently manufactures part QX100. Monthly production costs for 10,000 units of QX100 are as follows:

Direct materials	$	80,000
Direct labor	$	20,000
Variable overhead costs	$	50,000
Fixed overhead costs	$	40,000

Prestons Management Accountant estimates 20% of the fixed overhead costs currently assigned to product QX100 would be saved if the company purchased the part from an outside supplier. Preston can purchase the part from an outside supplier at $16.00 per unit.

Should Preston make or buy part QX100? Show calculations to support your answer.