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Alanco, Incorporated manufactures a variety of products and is currently maunfacturing all of its own component parts.
An outside supplier has offered to sell one of those components to Alanco. To evaluate this offer, the following information has been gathered relating to the cost of producing the component internally:
Direct materials	$4.00
Direct labor	6.00
Variable manufacturing overhead	2.00
Fixed manufacturing overhead, traceable*	5.00
Fixed manufacturing overhead, common but allocated	8.00
Total cost	$25.00
Supplier price	$21.00
Units used per year	12,000
* The fixed manufacturing overhead, traceable
Depreciation of equipment (no resale value)	30%
Supervisor salary	70%