Agricultural machinery (plant) A produce 20,000 units of natural gas filters for lawn mowers each year. The following information is based on last year's GDP performance.

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The production of gas filters will last for five years. If the company continues to produce the product on its own, the direct material cost will increase by 5% per year over the above cost of 60,000(1000 won) per year. The material cost for the first year is 63 million yuan, and the material cost for the second year is 66 million yuan. Labour costs will also increase by 6 per cent per year over the above-mentioned 180,000 won. The variable provision would increase from the above-mentioned cost of 135,000 won to 3 per cent per year, but the fixed provision would remain unchanged for the next five years.

Subcontractor (plant) B is proposing to supply 20,000 units to (plant) A at a price of 25,000 won each. After A adoption of the proposal, the previously used equipment would receive 35 million won per year and be leased to other companies. In addition, the fixed requirements for self-production will no longer occur. The MARR of A is 15%.

Whether or not the A accepts the proposal of the B is determined by the annual equivalent.

Wnit:looo won) project cost. 60,000 180,000 Direct material costs Direct labour costs variable provision Fixed provision Sum 135,000 70,000 445, 0oC Wnit:looo won) project cost. 60,000 180,000 Direct material costs Direct labour costs variable provision Fixed provision Sum 135,000 70,000 445, 0oC