$$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 $72$

florins per drum, we would be paying $10$ florins less than it costs

us to manufacture the drums in our own plant. $($The currency in

Aruba is the florin, denoted by Afl.$)$ Since we use $140,000$ drums a

year, we would save $1,400,000$ florins on an annual basis.$$ Antilles

Refining$$s present cost to manufacture one drum follows $($based on

$140,000$ drums per year$)$:$$A decision about whether to make or buy the drums is especially

important at this time, since the equipment being used to make the

drums is completely worn out and must be replaced. The choices

facing the company are as follows:$$The new equipment would be more efficient than the equipment

that Antilles Refining 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 $($Afl$1,050,000$ per year$)$ and direct materials cost per drum

would not be affected by the new equipment. The new equipment$$s

capacity would be $1,050,000$ drums per year. The company has no

other use for the space being used to produce the drums.$$The company$$s total general company overhead would be unaffected

by this decision.$$Required:$1-$a$.$Calculate the total costs and costs

per drum under the two alternatives. Assume that $140,000$ drums are

needed each year.$($Round "Cost Per Drum" answers to $2$

decimal places.$)$

$1-$b$.$Should the company make or buy based on

analysis in part $(1-$a$)?$MCMakeBuy

$2-$a$.$Calculate the total costs and costs per

drum under the two alternatives. Assume that $100,000$ drums are

needed each year.$($Round $"$Cost Per Drum" answers

to $2$ decimal places.$)$

$2-$b$.$Should the company make or buy based on

analysis in part $(2-$a$)?$MCMakeBuy

$2-$c$.$Calculate the total costs and costs per

drum under the two alternatives. Assume that $1,050,000$ drums are

needed each year.$($Round "Cost Per Drum" answers to $2$

decimal places.$)$

$2-$d$.$Should the company make or buy based on

analysis in part $(2-$c$)?$MCMakeBuy