=+3 The sales manager at Ace Ltd is concerned that the estimate of 20000 units may be high and believes that only 16000 units will be sold. Production will be cut back, freeing up work space. This space can be used to add the mud flaps and reflectors whether Ace Ltd buys the chains or makes them in-house. At this lower output, Ace Ltd will produce the chains in 16 batches of 1000 units each. On the basis of financial considerations alone, should Ace Ltd purchase the chains from the outside vendor?

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