Rowe Pottery designs and makes specialized gift quality pottery in Wisconsin. Rowe is considering manufacturing its own clay. Currently, the cost to buy clay is $2.55 per pound. If Rowe were to make the clay, three raw materials would have to be purchased. Mat 1 cost $.28/lb. Mat 2 cost $.44/lb and Mat 3 cost $.70/lb. A batch of clay would require 200 lbs of Mat 1 200 lbs of Mat 2 and 100 lbs of Mat 3. The clay would be mixed in a large vat for proper curing and consistency. Three employees ($15/hr labor and benefits) would be needed to monitor each batch of clay which takes 10 hours and yields 500 pounds of clay. Variable overhead would consist of additional maintenance on the required equipment and storage of the unfinished clay and would total $535 per batch of clay. The clay could be produced in the current facility but would result in approximately $90,000 of additional inventory on hand at any given time plus $45,000 up front cost for the new mixing vat (new assets) Currently, Rowe buys 250,000 pounds of clay each year. What is the return on assets if Rowe decides to make its own clay? Should they make the clay? Explain your conclusion. Assuming Rowe has excess capacity in its manufacturing facility and has the following costs: Pottery throwers are paid $30 per hour and can throw approximately 6 pieces per hour. Using the costs above for clay, the average pot requires 6 lbs of clay each (use the cost of clay determined above. All pottery must be fired in a kiln to harden. Every firing takes 10 hours of set up and 3 hours of take down ($15/hr) and yields 38 pieces of pottery. The kiln in 2015 used 235,000 terms of gas at $.46 per therm and was fired 930 times (which is the projection also for 2016). The kiln cost $150,000 in 2010 and is being depreciated over 10 years with no salvage value using the straight line method. Each price of pottery is also decorated at a rate of 4 pots per hour with decorators costing $22 per hour. Shipping and handling usually cost $6.00 per piece. The production manager's salary is $91,000 per year and selling costs are fixed around $126,000 per year. Rowe receives a special order for 3,000 Christmas pots that will be picked up at the factory cutting shipping and handling costs in half. Also, the decorating needs on these pots will take half as long as usual. The customer is offering $37 per pot (regular price is $58). Should Rowe take the order? Show your computations Explain your conclusion