Danford Company, a manufacturer of farm equipment, currently produces 17865 units of gas filters per year for use in its lawn-mower production. The costs, based on the previous year's production, are reported in the table below. It is anticipated that gas-filter production will last five years. If the company continues to produce the product in-house, annual direct material costs will increase at the rate of 5%. (For example, if the direct material cost expense entry in the table is $60,000 then the annual material costs during the first production year will be $63,000.) Direct labour will also increase at the rate of 6% per year. However, variable overhead costs will increase at the rate of 3%, but the fixed overhead will remain at its current level over the next five years. John Hollan Company has offered to sell Danford 17865 units of gas filters for $27 per unit. If Danford accepts the offer, some of the manufacturing facilities currently used to manufacture the filter could be rented to a third party for $35,000 per year. In addition, $3.5 per unit of the fixed overheard applied to the production of gas filters would be eliminated. The firm's interest rate is known to be 15%. What is the unit cost of buying the gas filter from the outside source? Should Danford accept John Holland's offer, and why? Item Expense ($) Direct Materials 50346 Direct Labour 189957 Variable Overhead (power and water) 169012 Fixed Overhead (light and heat) 62692 Total Cost . . 472007 Unit Cost for Option 01: (Purchase Unit from John Holland) Unit Cost: $ Unit Cost for Option 02: (In house Production) Unit Cost: $ Better Choice