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2 . Merton's production manager suggests purchasing Model 1 0 1 or Model 1 0 2 engines from an outside supplier in order to relieve

2. Merton's production manager suggests purchasing Model 101 or Model 102 engines
from an outside supplier in order to relieve the capacity problem in the engine
assembly department. If Merton decides to pursue this alternative, it will be
effectively "renting" capacity: furnishing the necessary materials and engine
components, and reimbursing the outside supplier for labor and overhead. Should
the company adopt this alternative? If so, what is the maximum rent it should be
willing to pay for a machine-hour of engine assembly capacity? What is the
maximum number of machine-hours it should rent?

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