"In my opinion, we ought to stop making our own drums and accept that outside supplier's offec," sald Wim Niewindt, managing director of Antiles Refining, NV, of Aruba. At a pnce of $19 per drum, we would be paying $5.80 less than it costs us to manufacture the drums in our own plant. Since we use 70,000 diums a year, that would be an annual cost savings of $406,000 "Antilies Refining"s current cost to manufacture one drum is given below (based on 70,000 drums per year): A decision about whether to make or buy the drums is especialiy important at this time because the equipment being used to make the drums is completely worn out and must be replaced The choices facing the company are Atternatve 1 Rent new equipment and continue to make the drums. The equipment would be rented for $189,000 per year Alternative 2. Purchase the drums from an outside supplier at 519 per drum The new equipment would be more efticient than the equipment that Antilles fefining has been using and, according to the manufacturer, would reduce direct labor and varable overnead costs by 308 . The old equipment has no resale value Supervision cost ( 563,000 per year) and direct materials cost per drum would not be affected by the new equipment. The new equipments capacity would be 100,000 drums pet yeat. The company's total general company overhead would be unaffected by this decision Required: 1 Assuming that 70,000 drums are needed each year, what is the financtal advantage (disadvantage) of buyng the drums fiom an outside supplier? 2. Assuming that 90.000 diums ore needed each year, what is the financal advantage (disadvantape) of buying the drums from an outsice suppiler? 3 Assuming that 100,000 drums are needed each year, what is the financtal odvantage (disadvantage) of buying the drums from an outside supplier? Note: For ail requirements, enter any "disadvantages" os a negative value. Do not round intermediate calculations. Do not leave any cells biank