G.N.V. Industries (GNV) located in Australia manufactures products used in oil drilling rigs. One of the parts used in the manufacturing of the rig is called an accumulator. Dale Dutton the managing director of GNV is considering whether to stop making the accumulator and instead accept an outside supplier's offer. "At a price of 132 Austrlian dollar (A$) per accumulator, we would be paying 10 dollars less than it costs us to manufacture the accumulator in our own plant. Since we use 340,000 accumulators a year, we would save 3,400,000 dollars on an annual basis." GNV's present cost to manufacture one accumulator follows (based on 340,000 accumulators per year): A$ 36.70 28.00 19.00 Direct material Direct labour Variable overhead Fixed overhead (A$21.60 general company overhead, A$19.20 depreciation and, A$17.50 supervision) Total cost per accumulator 58.30 A$142.00 Determining whether to make or buy the accumulator is especially important at this time, since the equipment being used to make the accumulators is completely worn out and must be replaced. The choices facing the company are as follows: Alternative 1: Purchase new equipment and continue to make the accumulators. The equipment would cost A$4,590,000; it would have a six-year useful life and no salvage value. The company uses straight-line depreciation. Alternative 2: Purchase the accumulators from an outside supplier at A$132 per accumulator under a six-year contract. The new equipment would be more efficient than the equipment that GNV has been using and, according to the manufacturer, would reduce direct labour and variable overhead costs by 30%. The old equipment has no resale value. Supervision cost (A$5,950,000 per year) and direct materials cost per accumulator would not be affected by the new equipment. The new equipment's capacity would be Connnn Scanlatarar.As. The names.bana atharrafartha would have a six-year useful life and no salvage value. The company uses straight-line depreciation. Alternative 2: Purchase the accumulators from an outside supplier at A$132 per accumulator under a six-year contract. The new equipment would be more efficient than the equipment that GNV has been using and, according to the manufacturer, would reduce direct labour and variable overhead costs by 30%. The old equipment has no resale value. Supervision cost (A$5,950,000 per year) and direct materials cost per accumulator would not be affected by the new equipment. The new equipment's capacity would be 5,950,000 accumulators per year. The company has no other use for the space being used to produce the accumulator. The company's total general company overhead would be unaffected by this decision. Required: 1-a. Calculate the total costs and costs per accumulator under the two alternatives. Assume that 340,000 accumulators are needed each year. (Round "Cost Per Accumulator" answers to 2 decimal places.) Differential Costs Per Accumulator Make Buy Total Differential Costs-340,000 Accumulators Make Buy A$ ASI Outside supplier's price AST Direct materials A$ Direct labour Variable overhead Supervision Depreciation Total cost A$ 0.00 A$ 0.00 A$ 0 A$ 1-b. Should the company make or buy based on analysis in part (1-a)? O Make O Buy 2-a. Calculate the total costs and costs per accumulator under the two alternatives. Assume that 250,000 accumulators are needed each year. (Round "Cost Per Accumulator" answers to 2 decimal places.) Differential Costs Per Accumulator Make Buy Total Differential Costs250,000 Accumulators Make Buy A$ Outside supplier's price Asi Direct materials A$ A$ Direct labour Variable overhead Supervision Depreciation Total cost A$ 0.00 A$ 0.00 A$ 0 A$ 0 G.N.V. Industries (GNV) located in Australia manufactures products used in oil drilling rigs. One of the parts used in the manufacturing of the rig is called an accumulator. Dale Dutton the managing director of GNV is considering whether to stop making the accumulator and instead accept an outside supplier's offer. "At a price of 132 Austrlian dollar (A$) per accumulator, we would be paying 10 dollars less than it costs us to manufacture the accumulator in our own plant. Since we use 340,000 accumulators a year, we would save 3,400,000 dollars on an annual basis." GNV's present cost to manufacture one accumulator follows (based on 340,000 accumulators per year): A$ 36.70 28.00 19.00 Direct material Direct labour Variable overhead Fixed overhead (A$21.60 general company overhead, A$19.20 depreciation and, A$17.50 supervision) Total cost per accumulator 58.30 A$142.00 Determining whether to make or buy the accumulator is especially important at this time, since the equipment being used to make the accumulators is completely worn out and must be replaced. The choices facing the company are as follows: Alternative 1: Purchase new equipment and continue to make the accumulators. The equipment would cost A$4,590,000; it would have a six-year useful life and no salvage value. The company uses straight-line depreciation. Alternative 2: Purchase the accumulators from an outside supplier at A$132 per accumulator under a six-year contract. The new equipment would be more efficient than the equipment that GNV has been using and, according to the manufacturer, would reduce direct labour and variable overhead costs by 30%. The old equipment has no resale value. Supervision cost (A$5,950,000 per year) and direct materials cost per accumulator would not be affected by the new equipment. The new equipment's capacity would be Connnn Scanlatarar.As. The names.bana atharrafartha would have a six-year useful life and no salvage value. The company uses straight-line depreciation. Alternative 2: Purchase the accumulators from an outside supplier at A$132 per accumulator under a six-year contract. The new equipment would be more efficient than the equipment that GNV has been using and, according to the manufacturer, would reduce direct labour and variable overhead costs by 30%. The old equipment has no resale value. Supervision cost (A$5,950,000 per year) and direct materials cost per accumulator would not be affected by the new equipment. The new equipment's capacity would be 5,950,000 accumulators per year. The company has no other use for the space being used to produce the accumulator. The company's total general company overhead would be unaffected by this decision. Required: 1-a. Calculate the total costs and costs per accumulator under the two alternatives. Assume that 340,000 accumulators are needed each year. (Round "Cost Per Accumulator" answers to 2 decimal places.) Differential Costs Per Accumulator Make Buy Total Differential Costs-340,000 Accumulators Make Buy A$ ASI Outside supplier's price AST Direct materials A$ Direct labour Variable overhead Supervision Depreciation Total cost A$ 0.00 A$ 0.00 A$ 0 A$ 1-b. Should the company make or buy based on analysis in part (1-a)? O Make O Buy 2-a. Calculate the total costs and costs per accumulator under the two alternatives. Assume that 250,000 accumulators are needed each year. (Round "Cost Per Accumulator" answers to 2 decimal places.) Differential Costs Per Accumulator Make Buy Total Differential Costs250,000 Accumulators Make Buy A$ Outside supplier's price Asi Direct materials A$ A$ Direct labour Variable overhead Supervision Depreciation Total cost A$ 0.00 A$ 0.00 A$ 0 A$ 0