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Shenk Company needs 20,000 components for a product it manufactures. If Shenk buys the component from...

Shenk Company needs 20,000 components for a product it manufactures. If Shenk buys the component from Vistavia Company instead of making it, Shenk could rent the released facilities as storage to another company for $70,000. Sixty percent of the fixed overhead applied will continue to be incurred regardless of what decision is made. The following information is available:

Cost to Shenk to make the part:     

Direct materials -- $5

Direct labor -- $16

Variable overhead -- $8

Fixed overhead -- $10

.

Cost to buy the part from Vistavia Company: $44

Which alternative is more desirable for Shenk and by what amount?

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