5 National Motors (NM) manufactures cars and produce tires themselves. 5 The following manufacturing costs are incurred per tire based on budgeted production of 60,000 tires per year: 7 Per Tire 3 Direct Materials Direct Labour Variable manufacturing overhead Fixed manufacturing overhead Total $38.00 30.00 16.00 20.00 $104.00 A supplier has approached NM to supply the tires for $95 per unit. Discontinuing the production of the tires would result in layoff of some salaried employees which will create a reduction of 30% of the fixed factory overhead It has also been determined that some space freed up in the manufacturing area could be rented out to outsiders for storage at an annual fee of $40,000. Required: 1. Qualitative factors aside, at the 60,000 budgeted level of production, what should NM do-make the part itself or buy it from the outside supplier? What is the impact on the company's net income? (Show your detailed analysis and state your decision). (8 marks)

National Motors (NM) manufactures cars and produce tires themselves. The followine manufacturiag costs are incurred per tire based on budgeted production of 60,000 tires per year: A supplier has approached NM to supply the tires for \\( \\$ 95 \\) per unit. Discontinuing the production of the tires would result in layoff of some salaried employees which will create a reduction of \30 of the fixed factory overhead It has also been determined that some space freed up in the manufacturing area could be rented out to outsiders for storage at an annual fee of \\( \\$ 40,000 \\). Required: 1. Qualitative factors aside, at the 60,000 budgeted level of production, what should NM do-make the part itself or buy it from the outside supplier? What is the impact on the company's net income? (Show your detailed analysis and state your decision). (8 marks) What is the impart on the company's net inceme? (Shew your detailed analyas and sate your decisien), (S marka) 2. At what kevel of production volume would N.M be indifferent between making the part itself or baying is from the sapplier? Sbow your detailed work. (3 marks) Over what range of production would the company be better off buying the part itself? Explain your decishon. (1 Mark)