its target cost reduction requirements. Exercise 16.17 The make or buy decision Lakeview Engine Inc. produces engines for the LO 2, 3 watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which are currently being produced by Lakeview. The supplier will charge Lakeview $270 per engine for the set of parts. Lakeview's current costs for those part sets are direct materials, $160; direct labor, $80; and manufacturing overhead applied at 100% of direct labor. Variable manufacturing overhead is considered to be 20% of the total, and fixed overhead will not change if the part sets are acquired from the outside supplier. Required: Should Lakeview Engine continue to make the part sets or accept the offer to purchase them for $270