Caballero Manufacturing incurs unit costs of $15 ($10 variable and $5 fixed) in making a sub-assembly part for its

Caballero Manufacturing incurs unit costs of $15 ($10 variable and $5 fixed) in making a sub-assembly part for its finished product. A supplier offers to make 20,000 of the assembly part at $13.75 per unit. If the offer is accepted, Caballero will save all variable costs but no fixed costs. 

Instructions: 

Part A) Prepare an analysis showing the total cost savings, if any, Caballero will 

realize by buying the part. 

Part B) Caballero Company should _________ the part because total annual costs to 

make are _________ than total costs to buy.