ABC has determined it can manufacture the new valve product internally for $27,000 in fixed costs (FC) and $8 variable costs (VC) per unit. The company president has estimated ABC will sell 4,800 (unit volume = UV) of these valves each year. Jay Production, a small but highly reputable company specializing in outsourced mechanical manufacturing, has contacted ABC's president, and offered to manufacture this new valve for ABC for an annual fee of $29,000 plus $6 per unit.
- Calculate and provide the total annual manufacturing cost if the valve is manufactured by ABC.
- Calculate and provide the total annual manufacturing cost if the valve is manufactured by Jay.
- Indicate which is better from a total annual manufacturing cost standpoint.