$$In my opinion, we ought to stop making our own drums and accept that outside supplier$$s offer,$$ said Wim Niewindt, managing director of Antilles Refining, N$.$V$.,$ of Aruba. $$At a price of $$21$ per drum, we would be paying $$6\mathrm{.}05$ less than it costs us to manufacture the drums in our own plant. Since we use $70,000$ drums a year, that would be an annual cost savings of $$423,500.$ Antilles Refining$$s current cost to manufacture one drum is given below $($based on $70,000$ drums per year$)$:

Direct materials $ $11\mathrm{.}00$

Direct labor $8\mathrm{.}00$

Variable overhead $2\mathrm{.}00$

Fixed overhead $($$$3\mathrm{.}20$ general company overhead, $$1\mathrm{.}95$ depreciation, and $$0\mathrm{.}90$ supervision$)6\mathrm{.}05$

Total cost per drum $ $27\mathrm{.}05$