Will Company assembles products from a group of interconnecting parts. The company produces some of the parts and buys some from outside vendors. The vendor for Part X has just increased it price by 35 percent, to $10 per unit for the first 5,000 units and $9 per additional units ordered each year. The company uses 7,500 units of Part X each year. unit costs if the company makes the part are as follows.
Direct materials $3.50
Direct labor 2.00
Variable overhead 4.00
Variable selling costs for the assembled product 3.75
Should Will Company continue to purchase Part X or begin making it?