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Tires Corp. produces a part that is used to manufacture one of its products. Total costs associated with the production of 10,000 units of the

Tires Corp. produces a part that is used to manufacture one of its products. Total costs associated with the production of 10,000 units of the part are as follows:

Direct materials

$90,000

Direct labor

$130,000

Variable factory overhead

$60,000

Fixed factory overhead*

$140,000

*$60,000 is avoidable.

Wired Company has offered to sell 10,000 units of the same part to Tires Corp. for $36 per unit. Assuming there is no other use for the facilities, should Tires Corp. make or buy the part? What is the savings per unit?

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