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One component of a radio produced by Audio Systems, Inc., is currently being purchased for $225 per 100 parts. Management is studying the possibility of manufacturing that component. Annual production (usage) at Audio is 70,000 units; fixed costs (all of which remain unchanged whether the part is made or purchased) are $38,500; and variable costs are $0.95 per unit for direct materials, $0.55 per unit for direct labor, and $0.60 per unit for variable overhead. Using incremental analysis, decide whether Audio Systems, Inc., should manufacture the part or continue to purchase it from an outside vendor.
Company X sells standard lawn mowers to Biggy Hardware (BH) for $100. BH is Company X's largest customer. Company X offers BH the following discounts based on purchases in a calendar year:
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