Quality Glass currently manufactures windshields for automobiles. Management is interested in outsourcing the production of these windshields to a reputable manufacturing company that can supply the windshields for $45 per unit. Quality Glass incurs the following annual production costs to produce 15,000 windshields internally.

Total Annual Cost m at 15,000 Units Variable production costs $ 8 Direct materials $ 10 $ 120,000 Direct labor $ 11 150,000 Applied (and actual) factory overhead 165,000 Fixed production costs 390,000 Total production costs $ 825,000