Problem 23-3A Make or buy LO A1

Haver Company currently produces component RX5 for its sole product. The current cost per unit to manufacture the required 52,000 units of RX5 follows.

Direct materials	$	5.00
Direct labor		9.00
Overhead		10.00
Total costs per unit		24.00

Direct materials and direct labor are 100% variable. Overhead is 70% fixed. An outside supplier has offered to supply the 52,000 units of RX5 for $18.00 per unit. Required: 1. Calculate the incremental costs of making and buying component RX5.

Total incremental costs of:	Making the units	Buying the units
Total costs
Should the company continue to manufacture the part, or should it buy the part from the outside supplier?