Required information

$[$The following information applies to the questions displayed below.$]$

Harbortown Marine Products $($HMP$)$ manufactures and sells various fixtures for boat cabins. One fixture

uses a specialized fitting that is not used in any other HMP product. The management of HMP has

considered outsourcing the fitting for several years but has never identified a suitable supplier. HMP has

collected the following data on the cost of the fitting:

Rivard Fittings, a local auto supplier, contacts HMP and tells them that because of the loss of one of

Rivard's customers, there is enough capacity to produce up to $5,000$ units of the fitting monthly. Rivard

has offered to sell HMP any quantity $($up to $5,000$ units monthly$)$ at a price of $$20$ per fitting.

If Rivard supplies all of the $3,000$ fittings currently produced by HMP$,$ HMP will avoid all of the variable

overhead associated with the fitting and one$-$third of the fixed overhead. Management estimates that

variable overhead for the fitting is $$4\mathrm{.}80$ per unit.

Required:

a$.$ Prepare a schedule that shows the differential costs.

b$.$ Should HMP continue to make the fittings or buy them from Rivard Fittings?