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Santos Company currently manufactures one of its crucial parts at a cost of $5.65 per...

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Accounting

Santos Company currently manufactures one of its crucial parts at a cost of $5.65 per unit. This cost is based on a normal production rate of 40,000 units per year. Variable costs are $3.90 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are $30,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Santos is considering buying the part from a supplier for a quoted price of $2.70 per unit guaranteed for a three-year period.

Calculate the total incremental cost of making 40,000 units. (Omit the "$" sign in your response.)

Total incremental cost $

Calculate the total incremental cost of buying 40,000 units. (Omit the "$" sign in your response.)

Total incremental cost $

Should the company continue to manufacture the part, or should it buy the part from the outside supplier?
Buy
Make

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