question 3

Exercise 13-10 (Algo) Sourcing Decisions [LO13-3] Futuro Company purchases 78,000 starters from a supplier at $13.50 pet unit that it installs in farm tractors. Due to a reduction in output, the company now has enough idle capacity to produce the starters vather than buying them from the supplier. However, the company's chief engineer is opposed to making the starters because the production cost per unit is $14.10, as shown below: If Futura decides to make the starters, a supervisor would be hired (at a salary of $132,600 ) to oversee production. However, the company has sufficient idle tools and machinery such that no new equipment would have to be purchased. The rent charge above is based on space utilized in the plant. The total rent on the plant is $87,000 per period. Required: What is the financial advantoge (disodvantoge) of making the 78,000 storters insteod of buying them from an outside supplier