The Morgan Corporation manufactures filing cabinets in two operations: machining and finishing. It provides the following information: Annual production (units) Machining Finishing Annual capacity (units) 110,000 90,000 90,000 90,000 Fixed operating costs (excluding direct materials) $540,000 $270,000 $6 $3 Fixed operating costs per unit produced ($540,000/90,000; $270,000/90,000) Each cabinet sells for $70 and has direct material costs of $30 incurred at the start of the machining operation. Morgan has no other variable costs. Morgan can sell whatever output it produces. The following requirements refer only to the preceding data. There is no connection between the requirements. Required: 1. Morgan is considering using some modern jigs and tools in the finishing operation that would increase annual finishing output by 1,150 units. The annual cost of these jigs and tools is $35,000. Should Morgan acquire these tools? Show your calculations. 2. The production manager of the Machining Department has submitted a proposal to do faster setups that would increase the annual capacity of the Machining Department by 9,000 units and would cost $4,000 per year. Should Morgan implement the change? Show your calculations. 3. An outside contractor offers to do the finishing operation for 9,500 units at $9 per unit, triple the $3 per unit that it costs Morgan to do the finishing in-house. Should Morgan accept the subcontractor's offer? Show your calculations. 4. The Hammond Corporation offers to machine 5,000 units at $3 per unit, half the $6 per unit that it costs Morgan to do the machining in-house. Should Morgan accept Hammond's offer? Show your calculations. 5. Morgan produces 1,700 defective units at the machining operation. What is the cost to Morgan of the defective items produced? Explain your answer briefly. 6. Morgan produces 1,700 defective units at the finishing operation. What is the cost to Morgan of the defective items produced? Explain your answer briefly.