Racer Industries is currently purchasing Part No$.76$ from an outside supplier for $$81$ per unit. Because of supplier reliability problems, the company is considering producing the part internally in an idle manufacturing plant. Annual volume over the next $6$ years is expected to total $299,000$ units at variable manufacturing costs of $$76$ per unit.

Racer must acquire $$81,000$ of new equipment if it reopens the plant. The equipment has a $6-$year service life, a $$14,100$ salvage value, and will be depreciated by the straight$-$line method. Repairs and maintenance are expected to average $$5,300$ per year in years $4-6,$

$2\mathrm{.}5$

and the equipment will be sold at the end of its life.

points

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