2. What words could you add to show how the supporting sentences relate
to the main idea?

It is cheaper to make the units in-house. The company will save $207,000.

Explanation:

Giving the following formula:

Production:

Direct materials $ 5.00

Direct labor 9.00

Varaible overhead= 10 - 8= $2

Total fixed overhead= (10*0.8)*69,000= $621,000

Direct materials and direct labor are 100% variable.

Overhead is 80% fixed.

An outside supplier has offered to supply the 69,000 units of RX5 for $19.00 per unit.

I will assume that none of the fixed overhead is avoidable.

First, we need to calculate the incremental cost of making 69,000 units. As it is incremental, we will take into account only the variable costs:

Make in-house:

Total variable cost= 69,000*(5 + 9 + 2)= $1,104,000

Now, the total cost of buying:

Buy:

Total cost= 69,000*19= $1,311,000

It is cheaper to make the units in-house. The company will save $207,000.