Baker Corp. - Make or Buy decision

  

Question:

Baker Corp. manufactures a high-tech recliner for weary professors after accounting classes. The motor housing costs for 17,500 units:

Direct Material 105

Direct Labor   70

Variable overhead   50 (10% avoidable)

Fixed overhead  60 (95% is a corporate allocation of common costs)

A Far East firm has offered to supply the part for $200.

a) Should the firm accept the outside offer. 

Assume the firm could rent out the manufacturing space used to assemble this part for a yearly rent of $120,000. Does this rental opportunity change the decision. Show all calculations