Exercise 1. (15 Points). A company is planning to introduce a new portable computer to its existing product line. Management must decide whether to make the computer case or buy it from an outside supplier. The lowest outside price is $90. If the case is produced internally, the company will have to purchase new equipment that will yield annual depreciation of $130,000. The company will also need to rent a new production facility at $200,000 a year. At 20,000 cases per year, a preliminary analysis of production costs shows the following: Per case Direct materials. Direct labor Variable overhead Equipment depreciation. Building rental Allocated fixed overhead Total cost.... $ 40.00 32.00 10.00 6.50 10.00 7.50 $106.00 Required: (1) Determine whether the company should make the cases or buy them from the outside supplier (2) What other factors, besides cost, should the company consider? 1