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Merton s production manager suggests purchasing Model 1 0 1 or Model 1 0 2 engines from an outside supplier in order to relieve the
Mertons production manager suggests purchasing Model or Model engines from an outside supplier in order to relieve the capacity problem in the engine assembly department. If Merton decides to pursue this alternative, it will be effectively renting capacity: furnishing the necessary materials and engine components, and reimbursing the outside supplier for labor an overhead.
Should the company adopt this alternative? Explain.
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