The following information is for question no. 21 and 22.

LockIT Security Company manufacturers home alarms. Currently, it is manufacturing one of its component, involving the following costs: materials $20, labor costs $10 and fixed costs $15 per unit. An outside provider of this component has offered to supply the component for $40.

1. The differential costs to manufacture the component is:
2. Should the company continue to make the component or use the outside provider? Why