5. A manufacturer of single-engine private airplanes manufactures its own engines. However, it is finding that other companies can provide competitive prices on the engines, so it may make sense to discontinue manufacturing, and outsource. The engines can be purchased for $2,000 each. Currently, they are manufactured at a full absorption cost of $2,200, as follows: 1,000 200 Direct labor Direct materials Overhead: Variable Fixed $200 800 $1.000 $2.200 On further investigation, you find that fixed overhead is 50% from allocated general factory depreciation, and 50% attributable to equipment which would be sold if outsourcing occurred. Assuming the firm makes and sells 10,000 aircraft per year, its cost of capital is 10%, and it is in a combined federal and state 40% tax bracket, what would you recommend to management? Would your answer change if the firm currently has a NOL, which will expire in three years