4. 11.42 The mechanical components division manager asks you to recommend a make/buy decision on a major automotive subassembly that is currently outsourced for a total of $3.9 million this year. This cost is expected to continue rising at a rate of $300,000 per year. For the make option, equipment will cost $3 million, have a salvage of $0.5 million, a life of 6 years, and an estimated $1.5 million per year for all direct costs. Your manager asks that both direct and indirect costs be included when the make alternative is evaluated. Typical indirect rates, bases, and expected usage are shown. Perform the AW evaluation at a MARR = 12% per year over a 6-year study period. Show both

(a) factor, and

(b) spreadsheet solutions. Table Summary: A table divided into 4 columns summarizes the indirect rates, bases, and expected usage of an equipment. The column headers are marked as: Department; Basis; Rate; and Expected Usage. Department Basis Rate Expected Usage X Direct labor cost $2.40 per $ $450,000 Y Materials cost $0.50 per $ $850,000 Z Number of inspections $20 per inspection 4,500