Make-or-Buy Decision Zion Manufacturing had always made its components in-house. However, Bryce Component Works had recently offered to supply one component, K2, at a price of $25 each. Zion uses 10,000 units of Component K2 each year. The cost per unit of this component is as follows: Direct materials $12.00 Direct labor 8.25 Variable overhead 4.50 Fixed overhead 2.00 Total $26.75 The fixed overhead is an allocated expense; none of it would be eliminated if production of Component K2 stopped. Required: 1. What are the alternatives facing Zion Manufacturing with respect to production of Component K2? Make the component in-house or buy it from Bryce 2. List the relevant costs for each alternative. If required, round your answers to the nearest cent. Total Relevant Cost Make $ 24.75 per unit Buy $ 25 per unit Differential Cost to Make $ 0.25 per unit If Zion decides to purchase the component from Bryce, by how much will operating income increase or decrease? Decrease $ 1.5 3. CONCEPTUAL CONNECTION: Which alternative is better?