QVX, Inc. manufactures an intermediate part it uses for assembling its finished

product. QCX normally produces 2,500 units of the product. Manufacturing costs are:

direct materials $1,20; direct labor $2.00; variable overhead $1.50; fixed overhead

allocated $2.50 per unit. An outside supplier offered to sell a similar part at $5.00 per

unit QVX will leave the facilities idle even if the part is purchased from outside.

a. Should the company make or buy the part?

b. The facility that is released when QVX does not produce the part can be

rented for $1,000 for the period. Should the company make or buy the part?