ment Problem 1. - Make or Buy Decision Mountain Bikes Unlimited is currently making the heavy-duty gear shifter that it installs on its most popular line of mountain bikes. The company's Accounting Department reports the following costs of making 9,000 shifters each year Per Unit9,000 Units Direct Materials Direct Labor $ 36,000 8 72,000 Variable overhead 3 27,000 Supervisor's salary 3 27,000 Depreciation of Special Equip 2 18,000 Allocated General Overhead 45,000 225,000 Total cost An outside supplier has offered to sell 9,000 shifters a year to Mountain Bikes Unlimited for a price of only $20 each, or a total of $180,000. The supervisor of the gear shifter manufacturing process would be retained if the company stops making the shifters and their salary would just increase the salary allocation to the other parts the supervisor currently oversees. The special equipment has no salvage value and that it has no other use except making the heavy-duty gear shifters. The allocated costs are common to all items produced in the factory however the Company has determined that if the shifters are outsourced that General Overhead would decrease by $12,000. However, the remainder of the Allocated General Overhead would continue unchanged, being reallocated to other products, if the shifters were bought from an outside supplier. REQUIRED: 1. Should the company stop making the shifters internally and buy them from the outside supplier? What is the financial advantage (disadvantage) of this decision? 2. What other factors should Mountain Bikes Unlimited consider when making an outsourcing decision? MacBo