05 Feb Simons Company currently manufactures one of its c
Simons Company currently manufactures one of its crucial parts at a cost of $2.72 per unit. This cost is based on a normal production rate of 40,000 units per year. Variable costs are $1.20 per unit, fixed costs related to making this part are $40,000 per year, and allocated fixed costs are $50,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Simons is considering buying the part from a supplier for a quoted price of $2.16 per unit guaranteed for a three-year period. Should the company continue to manufacture the part, or should it buy the part from the outside supplier? Support your answer with analyses.