Renad Company must decide whether to make or buy some of its components in a product it produces. The costs of making 160,000 units of this component are as follows. Direct materials $90,000 Variable overhead $32,000

Direct labor 14,600 Fixed overhead 24,000

Instead of making the components, the company has an opportunity to buy them at $0.90 per unit. If the company purchases the component, all variable costs and one-fourth of the fixed costs will be eliminated.

So, should Renad Company make or buy this components?

Select one:
a. Buy the component because it will increase (save) the net income by $7,600
b. Make the component because it will increase (save) the net income by $1,400
c. Buy the component because it will increase (save) the net income by $1,400
d. The correct answer is not available
e. Make the component because it will increase (save) the net income by $7,600