The Hyatt Company is trying to decide whether it should purchase new equipment and continue to make its sub-assemblies internally or if production should be discontinued and the sub-assembly purchased from an outside supplier. New equipment for producing the sub-assemblies can be purchased at a cost of $400,000.The equipment would have a five-year useful life (the company uses straight-line depreciation) and a $50,000 salvage value. Alternatively, the sub-assemblies could be purchased from an outside supplier.The supplier has offered to provide the sub-assemblies for $9 each under a five-year contract. Hyatt Company's present costs per unit of producing the sub-assemblies internally (with the old equipment) are given below.The costs are based on a current activity level of 40,000 sub-assemblies per year: Direct materials $3.00 Direct labour $4.20 Variable overhead $0.60 Fixed overhead $3.70 Total cost per unit $11.50 (Fixed overhead includes $0.80 supervision, $0.90 depreciation, and $2 general company overhead) The new equipment would be more efficient and would reduce direct labour costs and variable overhead costs by 25%.The company has no other use for the space now being used to produce the sub-assemblies.The company's total general company overhead would not be affected by this decision.Assume direct labour is a variable cost. Required: (a) Which, if any, of the above costs are not relevant to this decision? Why? (b) Assume that 40,000 sub-assemblies are needed each year.Make an analysis of the two alternatives and make a recommendation to the management of the company of the appropriate course of action.