Make$-$or$-$Buy Decision, Alternatives, Relevant Costs

Each year, Giada Company produces $17,000$ units of a component part used in tablet computers. An outside supplier has offered to supply the part for $$1\mathrm{.}22.$ The unit

cost is:

Required:

What are the alternatives for Giada Company?

Make the part in house or buy the part externally $$

Assume that none of the fixed cost is avoidable. List the relevant cost$($s$)$ of internal production.

Direct materials, direct labor and variable overhead $$

List the relevant cost$($s$)$ of external purchase.

Which alternative is more cost effective and by how much?

Making the part in house $$ by $

What if $$18,320$ of fixed overhead is rental of equipment used only in production of the component that can be avoided if the component is purchased? Which

alternative is more cost effective and by how much?