Waterway Engine Incorporated produces engines for the watercraft industry. An outside manufacturer has offered to supply several component parts used in the engine assemblies, which are currently being produced by Waterway. The supplier will charge Waterway $$295$ per engine for the set of parts. Waterway's current costs for those part sets are direct materials, $$155$; direct labor, $$80$; and

$8\mathrm{.}33$

points

Skipped

Rint

manufacturing overhead applied at $100\%$ of direct labor. Variable manufacturing overhead is considered to be $20\%$ of the total, and fixed overhead will not change if the part sets are acquired from the outside supplier.

Required:

a$.$ What would be the net cost advantage or disadvantage if Waterway decided to purchase the parts?

b$.$ Should Waterway Engine continue to make the part sets or accept the offer to purchase them for $$295?$

$\backslash$table$[[$a$.,,],[$b$.,$Waterway Engine Incorporated should,$]]$