The Lexington Company produces gas grills. This year's expected production is $20,000$ units. Currently, Lexington makes all of the side burners for its grills. Each grill includes two side burners. Lexington's management accountant reported the following costs associated with making the $40,000$ burners:

$\backslash$table$[[,\backslash$table$[[$Cost$],[$Per Unit$]],\backslash$table$[[$Cost for$],[40,000$ Units$]]],[$Direct Materials,$$8\mathrm{.}00,$$$320,000],[$Direct Manufacturing Labor,$$4\mathrm{.}00,$$$160,000],[$Variable Manufacturing Overhead,$$2\mathrm{.}00,$$$80,000],[$Inspection$,$ Setup, and Materials$-$Handling,,$$8,000],[$Machine Rent,,$$12,000],[\backslash$table$[[$Allocated Fixed Costs for:$],[$Plant Administration, Taxes, and Insurance$]],,$$$80,000],[$TOTAL COSTS,,$$660,000]]$

Lexington has received an offer from an outside vendor to supply any number of burners that Lexington needs$/$requires at a price of $$14\mathrm{.}80$ per burner. The following information is also available:

Inspection, setup, and materials$-$handling costs vary with the number of batches in which the burners are produced. Lexington produces burners in batch sizes of $1,000$ units. Lexington will produce the $40,000$ units in $40$ total batches.

Lexington rents the machine it uses to make the burners. Therefore, if Lexington buys all of its burners from the outside vendor, it will no longer need to pay rent for this machine.

If Lexington purchases the burners from the outside vendor, that means the facility where the burners are currently made will become idle. The allocated fixed plant administration, taxes, and insurance for this facility will not change. Lexington has received an offer from an outside vendor to supply any number of burners that

Lexington needs$/$requires at a price of $$14\mathrm{.}80$ per burner. The following information is also

available:

Inspection, setup, and materials$-$handling costs vary with the number of batches in which

the burners are produced. Lexington produces burners in batch sizes of $1,000$ units.

Lexington will produce the $40,000$ units in $40$ total batches.

Lexington rents the machine it uses to make the burners. Therefore, if Lexington buys all

of its burners from the outside vendor, it will no longer need to pay rent for this machine.

If Lexington purchases the burners from the outside vendor, that means the facility where

the burners are currently made will become idle. The allocated fixed plant administration,

taxes, and insurance for this facility will not change.

ANSWER THE FOLLOWING QUESTIONS:

Question $1$a:

Describe what decision Lexington has to make?

Question $1$b:

List the alternatives that Lexington can take in regards to the $40,000$ burners.

Question $1$c:

Evaluate the alternatives for Lexington. Be sure to show your calculations and clearly identify

any relevant costs information.

Question $1$d:

What are the qualitative factors that Lexington should consider when deciding whether or not

to outsource?