"That old equipment for producing oll drums is worn out," said Bil Seebach, president of Hondrich Compeny. "We need to moke a decision quickly." The company is tylng to decide whether ik should rent new equipment and continue to make its oll drums internally or whecher it should discontinue production and purchase them from an outside supplec. The alternatives follow: Ahernative t Rent new equipment for producing the oll drums for $208,000 per year. Atternative 2 Purchase oll drums from an outside supplier for $18.90 each. Hondrich Company's costs per unit of producing the oil drums intemally (with the old equipment) are given below. These costs are bosed on a current activity level of 40,000 units per year. The new equipment would be more efficient and, according to the manufacturec, would reduce direct labour costs and variable overhead costs by 25%. Supervision cost ( $104,000 per year) and direct materials cost per unit would not be affected by the new equipment. The new equipment's capacity would be 6 I,000 oil drums per yeat. The total general company overhead would be unaffected by this decision. Required 1. Seebach is unsure what the compony should do and would like an anolysis showing the unit costs and total costs for each of the no altematives given above. Assume that 40,000 oil drums are needed each year a. What will be the total relevont cost of 40,000 subassemblies if they are manufactured internally as compored to being purchased? 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. 0-2. What will be the total relevant cost of 52,000 subassemblies if they are manufactured internally? -2. What would be the per unit cost of subassembly manufactured internally? (Do not round intermediate calculations. Round your answer to 2 decimal places.) .3. Which course of action would you recommend if 52,000 assemblies are needed each year? Purchase from the outside supplier Monufacture internally Indifferent between the two alternatives b-1. What will be the total relevant cost of 65,000 subassemblles if they are manufactured internally? b-2. What would be the per unit cost of subassembly manufactured internally? (Do not round intermediate calculations. Round your answer to 2 decimal places.) 6.3. Which course of action would you recommend if 65,000 assemblies are needed each year? Manufacture internally Indifferent between the two alternatives Purchase from the outside supplier