Futura Company purchases the 72,000 starters that it installs in its standard line of farm tractors from a supplier for the price of $10.50 per unit. Due to a reduction in output, the company now has idle capacity that could be used to produce the starters rather than buying them from an outside supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $10.90 as shown below: Total Direct materials Direct labor Supervision Depreciation Variable manufacturing overhead Rent Total product cost Per Unit $ 5.00 2.00 1.70 1.10 0.50 0.60 $10.90 $122,480 $ 79,200 $ 43,200 If Futura decides to make the starters, a supervisor would have to be hired (at a salary of $122,400) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $88,000 per period. Depreciation is due to obsolescence rather than wear and tear. Required: What is the financial advantage (disadvantage) of making the 72,000 starters instead of buying them from an outside supplier? Thalassines kataskeves, S.A., of Greece makes marine equipment. The company has been experiencing losses on its bilge pump product line for several years. The most recent quarterly contribution format income statement for the bilge pump product line follows: Thalassines kataskeves, S.A. Income Statement-Bilge Pump For the Quarter Ended March 31 Sales Variable expenses : $ 420,000 Variable nanufacturing expenses $ 127,000 Sales commissions 41,000 Shipping 13,000 Total variable expenses 181.000 Contribution margin 239,000 Fixed expenses: Advertising (for the bilge pump product line) 22,000 Depreciation of equipment (no resale value) 115, een General factory overhead 34, eee" Salary of product-line manager 111,000 Insurance on inventories 9,000 Purchasing department 54, coat Total fixed expenses 345,000 Net operating loss $(106,000) *Common costs allocated on the basis of machine-hours. Common costs allocated on the basis of sales dollars. Discontinuing the bilge pump product line would not affect sales of other product lines and would have no effect on the company's total general factory overhead or total Purchasing Department expenses, Required: What is the financial advantage (disadvantage) of discontinuing the bilge pump product line