Mohave Corporation is considering outsourcing production of the umbrella tote bag included with some of its products. The company has received a bid from a supplier in Vietnam to produce $9,800$ units per year for $$9\mathrm{.}00$ each. Mohave the following information about the cost of

producing tote bags: $($see image$)$

Mohave determined all variable cost could be eliminated by outsourcing the tote bags, while $75\%$ of the fixed overhead cost is unavoidable. At this time, Mohave has no specific use in mind for the space currently dedicated to producing the tote bags.

Required:

$1.$ Compute the difference in cost between

making and buying the umbrella tote bag.

$2.$Based strictly on the incremental analysis, should Mohave buy the tote bags or continue to make them?

$3$a$.$ Suppose the space Mohave currently uses to make the bags could be utilized by a new product line that would generate $$6000$ an annual profits. Recompute the difference in cost between making and buying the umbrella tote bag.

$3$b$.$ Does this change your recommendation to Mohave?

Please answer all

required questions $1-3$b