Reference no: EM131776817

One component of a radio produced by Audio Systems, Inc., is currently being purchased for 255 per 100 parts. Management is studying the possibility of manufacturing that component. Annual production (usage) at Audio is 70,000 parts fixed costs (all of which remain unchanged whether the part is made or purchased) are $38,500 and variable costs are $0.95 for direct materials, $0.55 for direct labor, and $0.60 for variable overhead. Using incremental analysis, decide whether Audio Systems should manufacture the part or continue to purchase it from an outside vendor.