Tish Corporation produces part A12 used in the manufacture of one of its products. The unit

product cost is $23, computed as follows:

Direct materials $10

Direct labor (1 hour at $5 per hour) $5

Manufacturing overhead $8

Fixed overhead is applied on the basis of direct labor hours. The overhead rates above were computed using 5,000 direct labor hours. Total fixed overhead is $15,000.

An outside supplier has offered to provide the annual requirement of 5,000 of the parts

for only $19 each. The company estimates that 75% of the fixed manufacturing overhead

cost above could be eliminated if the parts are purchased from the outside supplier. Assume that direct labor is an avoidable cost in this decision. Tish Corporation needs to perform quality control that costs $2 per unit.

Should Tish Corporation continue to make part A12 or should A12 be purchased from the outside supplier? Why or why not?