Problem:

DeMarcus Industries manufactures a widget used in several models of its automatic dishwashers. Monthly production costs for 5,000 units are:

Direct materials                                   $40,000

Direct labor                                          10,000

Variable support costs                           25,000

Fixed support costs                                20,000

                           Total costs                $95,000

It is estimated that 20% of the fixed support costs assigned to the widgets will no longer be incurred if the company purchases the part from the outside supplier for $15.50 per unit. Considering all relevant information, what should DeMarcus do?

Additional Information:

This question is basically belongs to the Finance as well as it explains about the decision that the firm should take about purchasing the product.