Answer:
Gelb Company should choose to Buy the Component since it is the cheaper option. This gives a cost advantage of $28,875.
Explanation:
For each Option, include costs which are unavoidable because those would change as a result of this decision, they are relevant costs items.
Total incremental cost : Making
Variable costs (52,500 x $4.05)    $212,625
Fixed Costs (unavoidable)               $75,500 
Total                                                 $288,125 
Total incremental cost : Buying
Purchase Price ( 52,500 x $3.50) $183,750
Fixed Costs (unavoidable)              $75,500
Total                                               $259,250
Conclusion :
Gelb Company should choose to Buy the Component since it is the cheaper option. This gives a cost advantage of $28,875 ($288,125 - $259,250).