"That old equipment for producing oll drums is wom out," said Bill Stebach, president of Honarich Company. "We need to make a decision quickly. "The company is trying to decide whether it should rent new equpment and continie to make its dil tirums internally of whether it should discontinue production and purchase them from an outside rupplier. The altetnatives follow: Alternative t. Rent new equipment for producing the oil drums for $182,000 pet year Altemative 2. Purchase oll drums from an outside supplier for $20.20 each Hondrich Company's costs per uina of producing the oll drums internally (with the did equipenent are given below These costs are based on a current activity level of 35.000 units per year. The new equiptient would be more efficient and, according to the manufocturec would reduce direct abour costs and variable overhead costs by 25%. Supervision cost (\$91,000 per yean and direct materals cost per unit wookd not be alfected ty thet ner. equbment. The new equipment's capecity would be 65.000 oll druens peryear. The total general company eveitiead would be unaffected by this decition. Required: 1. Seebach is unsure what the company should do and would like an analysis shownig the unit costs and lotal costs for each of the twp alternatives given above. Assume that 35,000 oil drums are needed each yeat. a. What will be the fotal relevant cost of 35,000 subassemblies if they are manufactured intemally as compared to beina porchased? b. What would be the per unit cost of the each subassembly manufactured intermath? (Da not found intermediate calculations. Round your answer to 2 decimel places.) c. Which course of action would you recommend to the president? Purchase from the outside supplier Indifferent between the two alternatives Manufacture internally 2. Seebach is unsure what the company should do and would like an analysis showing the unit costs and total costs for each of the two alternatives given above a-1. What will be the total relevant cost of 52.000 subassemblies if they are manufactured internally? 0.2. What would be the per unit cost of subassembly manufactured internally? (Do not round intermediote caiculations. Round your onswer to 2 decimal ploces.) a-2. What would be the per unit cost of subassembly manufactured internally? (Do not round intermediote calculotione Round your answer to 2 decimal places.) a-3. Which course of action would you recommend if 52.000 assembiles are needed edch year? Manufacture internally Purchase from the outside suppliet Indifferent between the two alternatives b-1. What will be the total relevant cost of 65,000 subarsembles if they are manufictured intematy? b-2. What would be the per unit cost of subassembly manufactured internally? (Do not round intermediote calculations, Round your onswer to 2 decimal places.) b-3. Which course of action would you recommend if 65.000 assembiles are needed each year? Manufacture internally Purchase from the outside supplier Indifferent between the two alternatives 3. This part of the question is not part of your Conthect assigniment. "That old equipment for producing oll drums is worn out," said Ball Seebach, president of Hondrich Company "We need to make a decision quickly." The company is trying to decide whether it should rent new equipment and continue to make its di drums internatily or whether it should discontinue production and purchase them from an outside supplier. The alternatives follow: A/temative 1 Rent new equipment for producing the oil drums for $182,000 per year. Altemative 2. Purchase oll drums from an outside supplier for $20.20 each. Hondrich Company's costs per unit of producing the oll drums internally (with the old equipment) are given below. These costs are based on a current activity level of 35,000 units per year: The new equipment would be more efficient and, according to the manufacturet, would reduce direct labour costs and variable: overhead costs by 25%. Supervision cost (\$91,000 per year) and direct materials cost per unit would not be atfected by the nev equipment. The new equipment's capacity would be 65,000 oil drums per year. The total general company overhead would be unaffected by this decision. Required: 1. Seebach is unsure what the company should do and would like an analysis showing the unit costs and total costs for each of the hwo alternatives given above. Assume that 35,000 oil drums are needed each year. a. What will be the total relevant cost of 35,000 subassemblies if they are manufactured internally as compared to being purchased? b. What would be the per unit cost of the each subassembly manufactured internally? (Do not round intermediate calculations. Round your onswer to 2 decimal places.) c. Which course of action would you recommend to the president? Purchase from the outside supplier Indifferent between the two alternatives Manufacture internally 2. Seebach is unsure what the company should do and would like an analysis showing the unit costs and total costs for euch of the two alternatives given above. a-1. What will be the total relevant cost of 52,000 subassemblies if they are manufactured internally? a-2. What would be the per unit cost of subassembly manufactured intemally? (Do not round intermediote calculations. Round your answer to 2 decimal places.) a-3. Which course of action would you recommend if 52,000 assemblies are needed each year? Manufacture internally Purchase from the outside supplier Indifferent between the two alternatives b-1. What will be the total relevant cost of 65,000 subassemblies if they are manufactured intemaily? b-2. What would be the per unit cost of subassembly manufactured internally? (Do not round intermediate caculetions. Pound your answer to 2 decimal places.) b-3. Which course of action would you recommend if 65,000 assemblies are needed each year? Manufacture internally Purchase from the outside supplier Indifferent between the two altematives