Cheyenne Engine Corporation is considering whether to manufacture a new engine designated as model VX4. The engine will be a different size from any produced by Cheyenne, and the company expects to sell 20,000 units a year. At the present time, the company has the capacity to produce the projected quantity of all of the parts required for 20,000 units of VX4 except for the pistons. Each model VX4 engine requires 4 pistons, so 80,000 pistons will be required annually. Pistons are manufactured in the company's Tucson plant, which is presently operating at full capacity. None of the company's other plants has the equipment or the expertise necessary to manufacture pistons. In order to manufacture the number of pistons required, the company can expand facilities at the Tucson plant by renting additional machinery at an annual cost of $30,000, and hiring an additional supervisor at an annual cost of $40,000. Alternatively, the company can purchase the required number of pistons of equal quality from Nez Perce Machine Works, an outside supplier, at a contract price of $4.40 each. The projected costs of manufacturing 80,000 pistons at the Tucson plant are as follows. CHEYENNE CORPORATION PROJECTED COSTS OF MANUFACTURING PART (PISTONS) Direct Materials $ Direct Labor Allocated Manufacturing Overhead 160,000 80,000 240,000 The Tucson plant uses a predetermined manufacturing overhead rate determined on the basis of full absorption costing. Budgeted manufacturing overhead used as the basis for determining the rate was composed of 80% fixed cost and 20% variable cost. REQUIRED: Determine whether Cheyenne Corporation should manufacture the pistons in its Tucson plant or purchase them from Nez Perce Machine Works. Show supporting calculations