Question 1 (5 marks) "That old equipment for producing subassemblies is worn out," said Pail Taylor, Preuident of Timkin Company. "We need to make a decision quickly. "The company is trying to decide whether it should purchase new equipment and continue to malie its suthassembties or purchase them from an outside supplier. The altematives follow: Alternative 1: New equipment for producing the subaisemblies can be acyuired for $60,000 per year. Alternative 2: The subassemblies can be purchused from an outside supplier who has offered to provide them for $8 each. Timkin Company's present costs per unit of producing the subassemblies intemally (with the old equipment) are given below. These costs are based on a current activiry level of 40,000 suhussemblies ner vear: The new equipment would be more efficient and, according to the manufacturer, would reduce direct labour costs and variable overhead costs by 25%. Required: The president is unsure what the company should do and would like an analysis showing what. unit costs under each of the two alternatives given above. Assume that 40,000 subassemblies are needed each year. Which course of action would you recommend to the president? Hint: Using per unit data may be more friendly