Make or Buy Decision: A company makes a small engine for its products. The company has the

following costs per unit for each of the engine:

Direct materials $$25$

Direct labor $5$

Variable overhead $4$

Supervisor's salary $2$

Allocated overhead $2$

Total cost per unit $$38$

An outside supplier has offered to sell $10,000$ small engines to the company at a price of

$$350,000.$ The Supervisor's Salary is avoidable; that is$,$ the supervisor will not be needed if the

parts are purchased from the outside supplier. The Allocated overhead is unavoidable; that is$,$

the company will have the overhead costs regardless of whether it makes or buys the parts.

Homework Problem #$5$: Should the company make or buy the parts? Prepare a Make$/$Buy

differential analysis to show if the company should continue to make in$-$house or buy from the

outside supplier.