$"$In my opinion, we ought to stop making our own drums and accept that outside supplier's offer," said Wim Niewindt, managing director of Antilles Refining, N$.$V$.,$ of Aruba. $"$At a price of $$19$ per drum, we would be paying $$5\mathrm{.}45$ less than it costs us to manufacture the drums in our own plant. Since we use $85,000$ drums a year, that would be an annual cost savings of $$463,250."$ Antilles Refining's current cost to manufacture one drum is given below $($based on $85,000$ drums per year$)$:

Direct materials $$10\mathrm{.}70$

Direct labor $5\mathrm{.}50$

Variable overhead $1\mathrm{.}50$

Fixed overhead general company

overhead, $$2\mathrm{.}05$ depreciation, and $$1\mathrm{.}00$

supervision$)$

Total cost per drum

$\backslash$table$[[6\mathrm{.}75],[$$$24\mathrm{.}45$