Bacardi Rum Company is evaluating a make-versus-purchase option for the bottles used for its products. Multi-Lynx Companies, Inc. developed the following data for Bacardi Rum.

Option 1

Purchase 10,000 bottles per year at a fixed cost of US$8.50 per bottle. The cost

for placing the order is negligible.

Option 2

Manufacture 10,000 bottles in-house, using Bacardis available factory capacity.

Cost estimates for the in-house manufacturing are as follows:

Direct materials = US$5.00 per bottle

Direct labor = US$1.50 per bottle

Manufacturing overhead = 200% of direct labor costs

Should Bacardi Rum Company purchase the bottles, or should Bacardi Rum Company manufacture the bottles in-house?