Swartz Boats Company currently produces a battery used in manufacturing its boats. The company annually manufactures and sells 5,000 units of a particular model of fishing boat. Because of the low volume of activity, Swartz is unable to obtain the economies of scale that larger producers achieve. For example, the cost associated with producing the batteries it uses are almost 30 percent more than the cost of purchasing comparable batteries. Swartz could buy batteries for $516 each; it cost $660 each to make them. A detailed breakdown of current production costs for the batteries follows.

Item Unit Cost Total Unit-level cost: Materials $240 $1,200,000 Labor $150 750,000 Overhead 30 150,000 Allocated Facility Level cost $240 $1,200,000 Total $660 $3,300,000 Based on the figures, Swartzs president asserted that it would be foolish for the company to continue to produce the batteries at $660 each when it can but them for $516 each.

Required: Do you agree with the presidents conclusion? Support your answer with appropriate computations. Write an email explaining your rationale to the Company President.