Marcus Company assembles products from a group of interconnecting parts. Some of the parts are produced by the company, and some are purchased from outside vendors. The vendor for Part X has just increased its price by 35 percent, to $10 per unit for the first 5,000 units and $9 per additional unit ordered each year. The company uses 7,500 units of Part X each year. Unit costs if the company makes the part are:
Direct materials $3.50
Direct labor 1.75
Variable manufacturing overhead 4.25
Variable selling costs for the assembled product 3.75
Should the company continue to purchase the part, or should it begin making the part?