In my opinion, we ought to stop making our own drams and accept mat cutside we would be paying S6 05 less than it costs us to manufacture the arums in our own plant Since we use 70.000 drums a year, hat would be an annual cost s current cost to emanufacture suppler's offler said Wim Niewind, managing director of Antities Retining. N V, of Aruba. At a price of $21 per drun avings of $423,500 As Retnings one crum is given below (based on 70,000 drums per year) Direct materials Direct labor Variable everhead Fixed overhead (53 20 general company overhead $195 s 11.00 8.00 2 00 depreciation, and. $0 90 supervision) 6 05 5 27 05 Total cost per drum 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 facing the company are completely worn out and must be replaced The choin Aternabive Rent new equipment and continue to make the drums. The equigment would be rented for $189 000 per year Aternative 2 Purchase the drums from an outside suppier at $21 per arum The new equipement woud be more efficient than the equipment that Antiles Retring has been using and according 30% The od eouip ent has no resa e vale supervision cost 3000 per year and rect mae as cost pe drum would not be a-ected by the new e ?? 100,000 drums per year to the manufacturer would reduce direct labor and vaniabie overhead costs by ment The e e up errs a chy w u The company's total general company ovethead wouild be unaffected by this decision (Round alil intermediate calculations to 2 decimal places) Required: 1 to assist the managing arector n making a decision, prepare an analyss showing the total cost and the cost per drum Tor each of the two altematives given above Assume that 70 000 drums are needed each year