Superior Company manufactures gear model G37, which is used in several of its farm-equipment products. Annual production volume of G37 is 10,000 units. Unit costs for G37 are as follows:

Direct materials costs	$55
Direct labor costs	20
Variable overhead costs	30
Fixed overhead costs	18
Total costs	$123

Alternatively,

Superior

can purchase gear model G37 from an outside supplier for

$160

per unit. If G37 is outsourced,

Superior

can use the facility where G37 is currently manufactured for production of another gear-model G49. This would save

Superior

$116,000

in facility rental and other costs presently incurred.

Requirement

Should

Superior

make or buy G37? By how much will

Superior

be better off by choosing your decision rather than the alternative?