Gilberto Company currently manufactures 87,000 units per year of one of its crucial parts. Variable costs are $3.05 per unit, fixed costs related to making this part are $97,000 per year, and allocated fixed costs are $84,000 per year. Allocated fixed costs are unavoidable whether the company makes or buys the part. Gilberto is considering buying the part from a supplier for a quoted price of $4.25 per unit guaranteed for a three-year period. Required:
a. Calculate the total incremental cost of making 87,000 and buying87,000 units.
b. Should the company to manufacture the or should it buy the part from the outside suppller?