two-month period.) costs that are relevant (i.e.. avoidable) over M 12-27 Make or Buy Analysis IL02) old equipment for producing carburetors is worn out: said Bill Seebach president of ch Company. We need to make a decision quickly" The company is trying to decide r it should rent new equipment and continue to make its carburetors internally or t should discontinue production of its carburetors and purchase them from an out het supplier. The alternatives follow: Alternative 1: Rent new equipment for producing the carburetors for $120,000 per year. mative 2: Purchase carburetors from an outside supplier for $16 each uondrich Company's costs per unit of producing the carburetors internally (with the old ment) are given below. These costs are based on a current activity level of 40,000 units equip per year Direct materials Direct labour ariable overhead Fixed overhead ($150 supervision, $180 depreciation. 5.50 800 120 and S4 general company overhead) Total cost per unit 730 2200 The new equipment would be more efficient and, according to the manufacturer, would edirect labour costs and variable overhead costs by25%Supervision cost ($60000 per year) and direct materials cost per unit would not be affected by the new equipment. The new equipment's capacity would be 60.000 carburetors per year. he total general company overhead would be unaffected by this decision. quired Seebach is unsure what the company should do and would like an analysis showing the costs and total costs for each of the two alternatives given above. Assume that 40,000 carburetors are needed each year. Which course of action would you recommend to Seebach? Would your r 50000 carburetors per year, or (b) 60,000 carburetors per year? Show computations in good form. What other factors would you recommend that Seebach consider before making a decision? endation in (1) above be the same if the companys needs were (a) LEM 12-28 Accept or Reject a Special Order ILO2) ??.. Anala nrndllct called a Lop. Operating at capacity