.(TCO H) McMullen Co. uses 10,000 units of Part X each year as a component in the assembly of one of its products.The company is presently producing Part X internally at a total cost of $125,000 as follows.

Direct materials	$40,000
Direct labor	30,000
Variable manufacturing overhead	25,000
Fixed manufacturing overhead	30,000
Total costs	$125,000

An outside supplier has offered to provide Part X at a price of $10 per unit. If McMullen stops producing the part internally, one third of the fixed manufacturing overhead would be eliminated.

Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer. Please state clearly whether the part should be made or bought and share your work.(Points : 30)