Wheels, Inc., currently manufactures its own custom rims for automobiles. Management is interested in outsourcing production of these rims to a reputable manufacturing company that can supply the rims for $80 per unit. Wheels, Inc., incurs the following annual production costs to produce 10,000 rims internally. Per unit Total Annual Cost at $15,000 units Variable production $20 cost Direct materials $10 $200,000 Direct labor $30 100,000 Applied (and actual) 300,000 factory overhead Fixed production costs Factory building and equipment lease 70,000 Factory insurance 50,000 Production supervisors salary 100,000 Total production costs $825,000 If production is outsourced, all variable production costs, factory building and equipment lease costs, and factory insurance costs will be eliminated. The production supervisors salary cost will remain regardless of the decision to outsource or to produce internally because the supervisor recently signed a long-term contract with Wheels, Inc. Required: a. Perform differential analysis using the format presented in 7.2. Assume making the rims internally is Alternative 1, and buying the rims from an outside manufacturer is Alternative 2. b. Which alternative is the best? Explain.