Schmidt Corporation produces a part that is used in the manufacture of one of its products. The costs associated with the production of 10,000 units of this part are as follows:

Direct materials	$45,000
Direct labour	35,000
Variable factory overhead	30,000
Fixed factory overhead	70,000
Total costs	$180,000

Of the fixed factory overhead costs, $30,000 is avoidable.

1. Phil Company has offered to sell 10,000 units of the same part to Schmidt Corporation for $17 per unit. Assuming there is no other use for the facilities, Schmidt should
   1. make the part, as this would save $3 per unit.
   2. buy the part, as this would save $3 per unit.
   3. make the part, as this would save $4 per unit.
   4. make the part, as this would save $2 per unit.
   5. buy the part, as this would save $4 per unit.