Question 5: Kane Company is considering outsourcing a key component. A reliable supplier has quoted a price of $64.50 per unit. The following costs of the component when manufactured in-house are expressed on a per unit basis (assume Direct Labor is a variable cost):

Direct Materials $23.40

Direct Labor 16.10

Variable Overhead 26.70

Fixed Overhead $ 6.90

Total costs $73.10

a) What assumptions need to be made about the behavior of overhead costs for Kane in order to analyze the outsourcing decision?

SAVING ITEMS	RELEVANT
Direct Materials Cost	=$
Direct labor Costs	=$
Variable overhead costs	=$
Fixed overhead costs	=$

ADDITIONAL COSTS	RELEVANT COSTS
Direct labor Costs	=$
Direct materials Costs	=$
Fixed Overhead Costs	=$
Variable overhead cost	=$

b) Should Kane Company outsource the component? ???

c) What other factors are relevant to this decision? ???