BRIEF EXERCISE 9-4 Determining Whether to Make or Buy [LO1 - CC4] For many years, Futura Company has purchased the starters that it installs in its standard line of farm trac- tors. Due to a reduction in output of some of its products, the company has idle capacity that could be used to produce the starters. The chief engineer has recommended against this move, however, pointing out that the cost to produce the starters would be greater than the current $12.60 per unit purchase price: Per Unit Total Direct materials Direct labour Supervision Depreciation Variable manufacturing overhead Rent Total production cost $ 4.65 4.05 2.25 1.50 0.90 0.45 $13.80 $90,000 60,000 18,000 A supervisor would have to be hired to oversee production of the starters. However, the company has suffi- cient idle tools and machinery that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $148,000 per period. Depreciation is due to obsolescence, rather than wear and tear. Required: Prepare computations to show the dollar advantage or disadvantage per period of making the starters