Todd and Mr.Peanutbutter have been evaluating whether their company Halloween in January should continue manufacturing specialty Halloween masks or buy them from an outside supplier. A $100 cost per mask was determined as follows:

Direct materials $ 15

Direct labor 40

Variable manufacturing overhead 10

Fixed manufacturing overhead 35

Total $100

Halloween in January needs 4,000 masks per year. After BoJack, Inc., submitted a bid of $80 per masks, some members of management (e.g., Mr. Peanut butter) felt they could reduce costs by buying from BoJack, Inc. and discontinuing production of the masks. If the masks are obtained from BoJack, Inc., Halloween in Januarys unused production facilities could be leased to another company for $50,000 per year.

Required:

a. Calculate the cost to buy and make the component using only relevant costs/income. Indicate if the company should make or buy the component and the total dollar difference in favour of that alternative.