Starwood Aviation produces an executive jet for which it currently manufactures an airflow lever. The cost of each lever is indicated below:

Variable costs

Direct material $300

Direct labor 200

Variable overhead 150

Total variable costs $650

Fixed costs

Depreciation of equipment 120

Depreciation of building 80

Supervisory salaries 140

Total fixed costs 340

Total cost $990

The company has an offer from Lans Levers to produce the part for $700 per unit and is able to supply the 600 levers needed in the coming year. If the company accepts this offer and shuts down production of levers, supervisors will be reassigned to other areas needing their services. The equipment cannot be used elsewhere in the company, and it has no market value. However, the space occupied by the production of the lever can be used by another production group that is currently leasing space for $21,000 per year. Should the company should make or buy the lever? Why?

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