Archery Unlimited Company has 80 regular employees, all earning in excess of \(\$ 7,000\) per year. The company's plant and office are located in a state in which the maximum unemployment tax rate is \(5.4 \%\) of the first \(\$ 7,000\) paid each employee. However, the company has an excellent past unemployment record and a merit rating that reduces its state unemployment tax rate to \(3.0 \%\) of the first \(\$ 7,000\) paid each employee.

The company has recently received an order for a line of archery equipment from a chain of department stores. The order should be very profitable and will probably be repeated each year. In filling the order, Archery Unlimited can manufacture the various bows and other supplies with present machines and employees. However, it will have to add 20 persons to its work force for 40 hours per week for 10 weeks to finish the crossbows and pack them for shipment.

The company can hire these workers and add them to its own payroll, or it can secure the services of 20 people through Personnel, Inc. Archery Unlimited will pay Personnel, Inc., \(\$ 11.75\) per hour for each hour worked by each person supplied. The people will be employees of Personnel, Inc., and it will pay their wages and all taxes on the wages. On the other hand, if Archery Unlimited employs the workers and places them on its payroll, it will pay them \(\$ 10\) per hour and will also pay the following payroll taxes on their wages: FICA tax, \(7.5 \%\) (assumed rate); federal unemployment tax, \(0.8 \%\) on the first \(\$ 7,000\) paid each employee; state unemployment tax, \(4.5 \%\) on the first \(\$ 7,000\) paid each employee. (The state unemployment tax rate will be \(4.5 \%\) because if the company hires the temporary people and terminates them each year after 10 weeks, it will receive a less favorable merit rating.) The company will also have to pay medical insurance costs of \(\$ 30\) per employee per week.

Should Archery Unlimited place the temporary help on its own payroll, or should it secure their services through Personnel, Inc.? Justify your answer.