Outsourcing decision affected by opportunity costs Oakey Doors Company currently produces the doorknobs for the doors it makes and sells. The monthly cost of producing 5,000 doorknobs is as follows:

Venice Company has offered to sell comparable doorknobs to Oakey for $3.80 each.
Required
a. Should Oakey continue to make the doorknobs? Support you answer with appropriate computations.
b. For $6,000 per month, Oakey could lease the manufacturing space to another company. Would this potential cash inflow affect your response to Requirement a? Explain.

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Unit-level materials $4,000 7,500 1,000 8,000 5,000 Unit-level labor Unit-level overhead Product-level costs* Allocated facility-level costs *Twenty percent of these costs can be avoided if the doorknobs are purchased.