Siemens manufactures 12,000 electronic components per year. The manufacturing costs per component are listed below:

• Direct materials: €60
• Direct labor: €40
• Variable manufacturing overhead: €30
• Average fixed manufacturing overhead: €20

Siemens is offered to purchase 12,000 electronic components from Infineon at €120 per unit. If Siemens accepts, €50,000 of fixed overhead will be eliminated.

1. Perform a differential analysis to decide if Siemens should continue manufacturing or buy the components.
2. Calculate the overall cost difference if the purchase offer is accepted.