The management of Shatner Manufacturing Company is trying to decide whether to continue manufacturing a part or to buy it from an outside supplier. The part, called CISCO, is a component of the companys finished product. The following information was collected from the accounting records and production data for the year ending December 31, 2017. 1. 8,100 units of CISCO were produced in the Machining Department. 2. Variable manufacturing costs applicable to the production of each CISCO unit were: direct materials $ 4.65 , direct labor $ 4.46 , indirect labor $ 0.45 , utilities $ 0.38 . 3. Fixed manufacturing costs applicable to the production of CISCO were:

Cost Item		Direct		Allocated
Depreciation		$ 2,000		$ 870
Property taxes		480		350
Insurance		860		630
		$ 3,340		$ 1,850

All variable manufacturing and direct fixed costs will be eliminated if CISCO is purchased. Allocated costs will have to be absorbed by other production departments. 4. The lowest quotation for 8,100 CISCO units from a supplier is $ 80,707 . 5. If CISCO units are purchased, freight and inspection costs would be $ 0.37 per unit, and receiving costs totaling $ 1,310 per year would be incurred by the Machining Department.

Net Income Increase (Decrease) Make CISCO Buy CISCO Direct material Direct labor Indirect labor Utilities Depreciation 2870 870 2000 Property taxes 830 350 480 Insurance 1490 630 860 Purchase price 80707 -80707 Freight and inspection Receiving costs 1310 -1310) Total annual cost