Eyeworks Incorporated (EI) offers eye services, such as eye tests, eye surgery and eye glasses to patients in a large metropolitan area. El has its own eye glass manufacturing facility. The unit cost to produce one pair of eyeglasses is as follows: One Pair of Eyeglasses Direct Materials $4 Direct Labour $6 Variable Overhead $8 Fixed Overhead $15 Total $33 MacBook AS 20 ok $ 4 % 5 & 7 6 8 9 0 | R. . Y U Fixed overhead consists of the following: Fixed overhead consists of the following: Factory Supervisor Salary $39,000 Depreciation on factory $36.000 Total $75,000 A local eyeglass supplier has offered to provide El all the eyeglasses it needs at a price of 532.60. El would require 5,000 pairs of eyeglasses per year. Of the total fixed overhead assigned to the eyeglasses $39.000 is direct fixed overhead and will no longer be required if the eyeglasses are provided by an outside supplier. There is no alternative use for the facilities currently used to manufacture the eyeglasses Required Should El continue to make its own eyelasses, or should El purchase A $ % 5 & 7 6 8 9 0 E R T Y U 0 F G H JK Required: a. Should El continue to make its own eyeglasses, or should El purchase eyeglasses from the external supplier? State your assumptions. Show calculations to support your recommendation. (7 marks) b. Suppose that the manufacturing facility is rented rather than owned. Thus, there is no depreciation expense but rather a rental fee of $36,000. Explain what effect this has on your analysis from part a)