Dayton Engineering manufactures small engines that it sells to manufacturers who install them in products such as lawn mowers. The company currently manufactures all the parts used in thes engines but is considering a proposal from an external supplier who wishes to supply the starter assemblies used in these engines. The starter assemblies are currently manufactured in Divisio of Dayton Engineering. The costs relating to the starter assemblies for the past 12 months were as follows: (Click the icon to view the costs.) Over the past year, Division 3 manufactured 150,000 starter assemblies. The average cost for each starter assembly is $8 ($1,200,000/150,000). Further analysis of manufacturing overhead revealed the following information. Of the total manufacturing overhead, only 25% is considered variable. Of the fixed portion, $262,500 is an allocation of general overhead that will remain unchanged for the company as a whole if production of the starter assemblies is discontinued. A further $175,000 of the fixed overhead is avoidable if production of the starter assemblies is discontinued. The balance of the current fixed overhead, $87,500, is the division manager's salary. If Dayton Engineering discontinues production of the starter assemblies, the manager of Division 3 will be transferred to Division 2 at the same salary. This move will allow the company to save the $80,000 salary that would otherwise be paid to attract an outsider to this position. Required Requirement 1. Tutwiler Electronics, a reliable supplier, has offered to supply starter-assembly units at $5 per unit. Because this price is less than the current average cost of $8 per unit, the vice-president of manufacturing is eager to accept this offer. On the basis of financial considerations alone, should Dayton Engineering accept the outside offer? Show your calculations. (Hint: Production output in the coming year may be different from production output in the past year) (Round the variable costs per unit to the nearest cent. Leave unused cells blank) Variable direct materials Variable direct manufacturing labour Variable manufacturing overhead Total variable costs Variable manufacturing costs per unit Fixed general manufacturing overhead Fixed overhead, avoidable Division 2 manager's salary All Data Relevant Data Alternative 1: Make Alternative 2: Buy Alternative 1: Make Alternative 2: Buy Costs Direct materials Variable direct manufacturing labour Manufacturing overhead Total Print Done $ 300,000 200,000 700,000 $ 1,200,000 on - X Required 1. Tutwiler Electronics, a reliable supplier, has offered to supply starter-assembly units at $5 per unit. Because this price is less than the current average cost of $8 per unit, the vice-president of manufacturing is eager to accept this offer. On the basis of financial considerations alone, should Dayton Engineering accept the outside offer? Show your calculations. (Hint: Production output in the coming year may be different from production output in the past year.) 2. How, if at all, would your response to requirement 1 change if the company could use the vacated plant space for storage and, in so doing, avoid $100,000 of outside storage charges currently incurred? Why is this information relevant or irrelevant? Print Done - Variable direct materials Variable direct manufacturing labour Variable manufacturing overhead Total variable costs Variable manufacturing costs per unit Fixed general manufacturing overhead Fixed overhead, avoidable Division 2 manager's salary Division 3 manager's salary Total fixed costs Purchase cost per unit, if bought from Tutwiler Electronics es Get more help Relevant Data Alternative 2: Buy All Data Alternative 1: Make Alternative 2: Buy Alternative 1: Make I