Bacrometer, Inc., makes part no. 566 on one of its production lines. Each month Bacrometer makes 60,000 of part no. 566 at a variable cost of $2.50 per part. The fixed costs for the production line are $180,000, or $3.00 per part. Bacrometer has been provided a bid for part no. 566 from another manufacturer that will make the part for $2.65 per part. Bacrometer knows the production line could be rented to another manufacturer for $5,000 per month. Should Bacrometer continue to make part no. 566 or should it buy the part and rent the production line?
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