. Royal Company manufactures 20,000 units of part R-3 each year for use on its production line. At this level of activity, the cost per unit for part R-3 is: Discontinuing the overnight cases would not affect the company's sales of its other product lines, its total general factory overhead, or its total purchasing department expenses.

Direct materials $4.80

Direct labor 7.00

Variable manufacturing overhead 3.20

Fixed manufacturing overhead 10.00

Total cost per part $25.00

An outside supplier has offered to sell 20,000 units of part R-3 each year to Royal Company for $23.50 per part. If Royal Company accepts this offer, the facilities now being used to manufacture part R-3 could be rented to another company at an annual rental of $150,000. However, Royal Company has determined that $6 of the fixed manufacturing overhead is applied to part R-3 would continue even if part R-3 were purchased from the outside supplier.

Required: Should the company make or buy the product. Show your calculations clearly