DeMarcus Industries manufactures a part used in several models of its automatic dishwashers. Monthly production costs for 5,000 units are:
Direct materials.........................$40,000
Direct labour..............................10,000
Variable support costs...................25,000
Fixed support costs......................20,000
Total costs...............................$95,000
It is estimated that 20% of the fixed support costs assigned to the part will no longer be incurred if the company purchases the part from the outside supplier for $15.50 per unit.
Required:
1. Considering all relevant information, what should DeMarcus do?
2. What other factors should DeMarcus take into consideration before making this decision?