Redbud Company uses a certain part in its manufacturing process that it buys from an outside supplier for $36 per part plus another $5 for shipping and other purchasing-related costs. The company will need 18,000 of these parts in the next year and is considering making the part internally. After performing a capacity analysis, Redbud determined that it has sufficient unused capacity to manufacture the 18,000 parts but would need to hire a manager at an annual salary of $54,000 to oversee this production activity. Estimated production costs are determined to be as follows:

Direct material	$	23
Direct labor		10
Variable overhead		5
Fixed overhead (includes manager at $3 per unit)		8
Total unit cost	$	46

b. Should Redbud produce the part or continue to buy it from the outside supplier?

Multiple Choice

• Redbud is indifferent about the decision.

• Redbud should continue to buy it from the outside supplier.

• Redbud should produce the part