Dana Corporation, 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 Danas 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 EC 113, a key component of an emissions control system:

	Total Cost of 65,000 Units	Cost per Unit
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

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 salaries. All the fixed overhead would continue if Dana bought the component except that the cost of the $130,000 pertaining to some supervisory and custodial personnel could be avoided.

Assume that the capacity now used to make parts will become idle if the parts are purchased. Should Dana buy or make the parts? Show computations.

Assume that the capacity now used to make parts either (a) be rented to a nearby manufacturer for $25,000 for the year or (b) be used to make oil filters that yield a profit of contribution of $15,000. Should Dana buy or make part EC 113? Show your computations.

Please provide step by step instruction for how these solutions were formulated. Thanks!