6-47 Make or Buy Dant Leorpatedon, based in Toledo, Ohio, is a global manufacturer of highly engineered products that serve industrial, vehicle, construction, commercial, aerospace, and semiconductor markets. It frequently subcontracts work to other manufacturers, depending on whether Dana's facilities are fully occupied. Suppose Dana is about to make some final decisions regarding the use of its manufacturing facilities for the coming year. The following are the costs of making part ECI13, a key component of an emissions control system: \begin{tabular}{lcc} \hline & Total Cost for 65,000 Units & Cost per Unit \\ \hline Direct materials & $585,000 & $9 \\ Direct labor & 715,000 & 11 \\ Variable factory overhead & 650,000 & 10 \\ Fixed factory overhead & 195,000 & 3 \\ Total manufacturing costs & $2,145,000 & $33 \\ \hline \end{tabular} CHAPTER 6 - RELEVANT INFORMATION FOR DECISION MAKING WITH A FOCUS ON OPERATIONAL DECISIONS 275 Another manufacturer has offered to sell the same part to Dana for $28 each. The fixed overhead consists of depreciation, property taxes, insurance, and supervisory alaries. All the fixed overhead would continue if Dana bought the component except that the cost of $130,000 pertaining to some supervisory and custodial pernonnel could be avoided. 1. Assume that the capacity now used to make parts will become idle if the parts are purchased. Should Dana buy of make the parts? Show computations. 2. Assume that the capacity now used to make pars will either (a) be rented to a nearby manufacturer for $25,000 for the year or (b) be used to make oil filters that will yield a profit contribution of \$15,000. Should Dana buy or make part EC1 137 Show your computations