"In my opinion, we ought to stop making our own drums and accept that outside supplier's offer sald Wim Niewindt, managing director of Antilles Refining, NV. of Aruba. At a price of $19 per drum, we would be paying $5.35 less than I costs us to manufacture the drums in our own plant Since we use 60,000 drums a year, that would be an annual cost savings of $321000. Anilles Refining's current cost to manufacture one drum is given below (based on 60.000 drums per year: Cest per $ Direct materials Direct labour Variable overhead Fixed overhead ($3.ee general company overhead, $1.70 Dr 10.45 ee 1.5e 5.40 depreciation, and, see supervision) TOERT cost pere drum 3 24.35 A decision about whether to make or buy the drums is especially 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: Alternative Rent new equipment and continue to make the drums. The equipment would be rented for $168.000 per year Alternative 2Purchase the drums from an outside supplier at $19 per drum 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 20%. The old equipment has no resale value Supervision cost ($42.000 per year and direct materials cost per drum would not be affected by the new equipment. The new equipment's capacity would be 140.000 drums per year The company's total general company overhead would be unaffected by this decision (Round all intermediate calculations to 2 decimal places Required 1 To as the managing director in making a decision prepare an analysis showing the total cost and the cost per dem for each of the two atemalas given above Assume that 60.000 drums are needed each yes s What will be the total relevant cost of 60.000 arums they are manufactured Internally as compared to being purchased chance 10 b. What would be the per unit cost of each drum manufactured internally? (Round your answer to 2 decimal places) Pritof drum $ 10.00 Which course of action would you recommend to the managing director ans