1. Eggbean Corp. is an eyeglass company. There are two important components to an eyeglass, the lenses and the frame. Eggbean is renowned for cutting edge research in lenses. They are debating whether they should also manufacture frames in-house or subcontract the manufacturing to Guatemala. Following is the cost structure for 200,000 frames per annum. Should Eggbean bring the frame manufacturing activity in-house or contract it to Guatemala? Please show the financial calculations and explain the logic (in words) for your answer (8 points).

Inhouse			Contracting
Year 1			Year 1
Cost of the factory	$2,000,000		Search costs	$45,000
Raw materials	$400,000		Contract writing	$50,000
Overheads	$25,000		Quality control and monitoring	$75,000
Employees (5)	$250,000		Cost per frame from supplier	$12
Employee Hiring costs	$25,000
Inhouse			Contracting
Year 2			Year 2
Maintenance	$400,000		Search costs	$5,000
Raw materials	$400,000		Contract writing	$10,000
Overheads	$25,000		Quality control and monitoring	$75,000
Employees (5)	$250,000		Cost per frame from supplier	$10
Employee Hiring costs	$25,000