Pnok Company has been purchasing a component, Part Q, for $18.90 a unit. Pnok is currently operating at 70% of capacity and no significant increase in production is anticipated in the near future. The cost of manufacturing a unit of Part Q, determined by absorption costing methods, is estimated as follows:
Direct Materials $11.25 Direct Labor 4.50 Variable factory overhead 1.12 Fixed factory overhead 3.15 Total $20.02
Prepare a differential analysis report, dated March 12 of the current year, on the decision to make or buy Part Q