Kunin Company manufactures guitars and has been purchasing freboards for their guitars at a cost of $125 per unit. The company, which is below full capacity, charges factory overhead to production at the rate of 30% of direct labor cost. The fully absorbed unit costs to produce a comparable fretboard are expected to be as follows:
Direct Materials $ 75
Direct Labor $ 50
Factory Overhead $ 15
Cost per Unit $140
If Kunin Company manufactures the fretboards, fixed factory costs will not increase, and factory overhead costs associated with the fretboards are expected to be 20% of the direct labor costs.
Question: Should Kunin Company make or buy the fretboards? Show the potential gain per unit for your decision.