5. Felicity Company currently buys 50,000 units of a part used to manufacture its product at...

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5. Felicity Company currently buys 50,000 units of a part used to manufacture its product at $200 per unit. Recently the supplier informed Felicity that a 20 percent increase will take effect next year. Felicity has some additional space and could produce the units for the following per-unit costs (based on 50,000 units): (35 points) Direct materials Direct labor Variable overhead Fixed overhead Total $72 68 60 52 $252 If the units are purchased from the supplier, Felicity would continue to incur $700,000 of fixed costs. Required: a. Should Felicity Company buy the parts externally or make them internally? Prepare differential analysis to support your decision. b. Should Felicity Company buy the parts externally or make them internally, assuming that they can rent the plant for $350,000 per year to Alpha Corporation when the parts are purchased externally? Prepare differential analysis to support your decision. 5. Felicity Company currently buys 50,000 units of a part used to manufacture its product at $200 per unit. Recently the supplier informed Felicity that a 20 percent increase will take effect next year. Felicity has some additional space and could produce the units for the following per-unit costs (based on 50,000 units): (35 points) Direct materials Direct labor Variable overhead Fixed overhead Total $72 68 60 52 $252 If the units are purchased from the supplier, Felicity would continue to incur $700,000 of fixed costs. Required: a. Should Felicity Company buy the parts externally or make them internally? Prepare differential analysis to support your decision. b. Should Felicity Company buy the parts externally or make them internally, assuming that they can rent the plant for $350,000 per year to Alpha Corporation when the parts are purchased externally? Prepare differential analysis to support your decision.