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GMH Company manufactures 100,000 units of Part X annually for use in one of its main products. The total manufacturing cost for 100,000 units of Part X is as follows:
Direct materials $120,000
Direct labor 80,000
Variable overhead 40,000
Fixed overhead 160,000
Total cost $400,000
Question 1: Selin Company has offered to sell GMH 100,000 units of Part X per year. If GMH accepts this offer, the facilities used to produce Part X can be used in the production of other components. This change would save GMH $10,000 in rent for the leased production facility used at present to support the production of other components. What is the amount of relevant costs for this make-or-buy decision?
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