Waterways has discovered that a small fitting it now manufactures at a unit cost of $$1\mathrm{.}00$ could be bought elsewhere for $$0\mathrm{.}81$ per What is Waterways' opportunity cost if it chooses to buy the small fitting and start manufacturing the timing unit?

The opportunity cost is $

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unit. Waterways has unit fixed manufacturing costs of $$0\mathrm{.}20$ that cannot be eliminated by buying this unit. Waterways needs $498,000$

of these units each year.

If Waterways decides to buy rather than produce the small fitting, it can devote the machinery and labor to making a timing unit it now

buys from another company. Waterways uses approximately $400$ of these units each year. The cost of the unit is $$12\mathrm{.}39.$ To aid in the

production of this unit, Waterways would need to purchase a new machine at a cost of $$2,330,$ and the unit cost of producing the units

would be $$10\mathrm{.}10.$

$($a$)$

Your answer is correct.

Without considering the possibility of making the timing unit, evaluate whether Waterways should buy or continue to make the

small fitting.

The company should

the fitting. Incremental cost $/($savings$)$ will be $

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