Lindon Company uses 4,500 units of part X each year as a component in the assembly of on of its products. the company is presently producing Part X internally at a total cost of $69,000 as follows: Direct materials $16,000 Direct Labor 18,000 Variable manufacturing Overhead 10,000 Fixed Manufacturing Overhead 25,000 Total Costs 69,000 An outside supplier has offered to provide Part X at a price of 11 per unit. If Lindon stops producing Part X internally, one third of the manufacturing overhead would be eliminated.
Required: Prepare a make-or-buy analysis showing the annual advantage or disadvantage of accepting the outside supplier's offer.