1. Giulia is clearly intrigued by the option to own the forge. If she were to accept the contract offer ($10.50 per unit price; 4, monthly) and assume ownership of the forge, how would her business model change [at a minimum consider how her revenues would change and her costs would change]? Her revenues will not change in as much as the production alternatives have no observable impact on revenues. The costs would be substantially different under the insourcing/outsourcing models. Current outsourcing model: costs = $9.00 + $1.45 = $10.45 per piton; all costs are variable. Proposed insourcing model Variable costs Material $1.45 supplies 0.11 electricity 0.18 variable part found using high/low method Total per unit $1.74 Fixed costs labor 345.000 building costs 33.000 depreciation $ 14.355 electricity 20.736 fixed part found using high/low method 5, GGA 7,200 Total per year $ 420.291