Xia Co. currently buys a component part for $10 per unit. Xia believes that making the part would require $7.20 per unit of direct materials and $1.05 per unit of direct labor. Xia allocates overhead using a predetermined overhead rate of 245% of direct labor cost. Xia estimates an incremental overhead rate of $0.75 per unit to make the part.
What are the relevant costs for Xia to make or buy the part? (Round your answers to 2 decimal places.) Should Xia make or buy the part?
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