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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 101 or Model 102 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.
1. What is the maximum rent it should be willing to pay for a machine-hour of engine capacity?
2. What is the maximum number of machine-hours it should rent?

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