Simple Grill operates in Hilliard, Ohio and produces gas grills. This years expected production is 25,000 grills. Currently, Simple makes all the side burners for the grills, where each grill includes two side burners. Simples management accountant reports the following costs for making 50,000 burners:

	Cost per unit	Costs for 50,000 units
Direct materials	$ 10.00	$ 500,000
Direct manufacturing labor	5.00	250,000
Variable manufacturing overhead	2.50	125,000
Inspection, setup, materials handling		12,000
Machine rent		29,000
Allocated fixed costs (taxes, insurance, etc.)		125,000
Total costs		$ 1,041,000

The following information is available:

• Inspection, setup, and materials-handling costs vary in direct proportion to the number of batches in which the burners are produced. Simple produces burners in batch sizes of 1,000 burners per batch so Simple will produce the 50,000 burners in 50 batches.
• Simple leases the machine it uses to make the burners. If Simple buys all of its burners from the outside vendor, it will no longer pay the rent on this machine.
• Simple received an offer from an outside vendor to supply any number of burners required at a price of $18.50 per burner.

1. Assume that if Simple purchases the burners from the outside vendor, Simple will continue to pay all of the $125,000 allocated fixed costs of the facility where the burners are currently made, though the facility will remain idle. Should Simple accept the outside vendors offer at the anticipated volume of 50,000 burners? Show your analysis.
2. For this question, assume that if the burners are purchased outside, Simple will use the facility where the burners are currently made to upgrade the grills by adding a rotisserie attachment. (Note: each grill will still contain two side burners and will now have one rotisserie attachment). As a consequence, the selling price of the enhanced grills will be raised by $60. The variable cost per unit of the upgrade would be $50, and additional tooling costs of $200,000 per year would be incurred. Should Simple make the burners and continue to offer the original model grill or buy the burners and offer the enhanced model grill? Assume that under either option, 25,000 grills will be produced and sold.
3. Refer back to the information in the original problem. The sales manager at Simple is concerned that the estimate of 25,000 grills may be high and believes that only 20,000 grills will be sold. Production will be cut back, freeing up space in the production facility. This freed-up space can be used to produce the rotisserie attachments whether Simple buys the burners or makes them in-house. At this lower output level of 20,000 grills, Simple will produce the burners in 40 batches of 1,000 units each. Should Simple make the burners or buy the burners under the assumption that they will sell 20,000 units of the enhanced model grill under either alternative? Show your analysis.