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Rainbow Co. has been producing a part for a camera they manufacture. The costs for this part are as follows: Fixed costs Total variable costs

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Rainbow Co. has been producing a part for a camera they manufacture. The costs for this part are as follows: Fixed costs Total variable costs Units produced $250,000 $120,000 30,000 units Robbins has an opportunity to purchase this part rather than manufacture it. To purchase the part will cost $6 a unit. If the part is purchased, fixed costs will be reduced by 20%. Company could use idle capacity to manufacture other products with contribution margin of $15,000. Should Robbins Co. make or buy this part? Show how you arrived at your decision

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