XYZ makes luxury guitars. During the current year, XYZ produced 10,000 units and incurred the following costs:

Unit-level materials costs (10,000 @ $15)	$	150,000
Unit-level labor costs (10,000 @ $20)		200,000
Unit-level overhead costs (10,000 @ $16)		160,000
Depreciation expenses on equipment*		12,000
Product-level supervisory salaries**		46,000

^*The equipment was purchased on January 1 last year for $60,000 and has a current book value of $48,000, a remaining useful life of four years, and a zero salvage value. If the equipment is not used to produce crates, it can be leased for $18,000 per year.

** The supervisor will be let go if XYZ outsources.

Required:

1. XYZ has the opportunity to purchase the guitars from an outside supplier for $55. The supplier is willing to hold sufficient inventories to meet XYZ's needs. Should XYZ outsource the manufacturing of its crates? Why or why not? You must show work to support your answer.

2. At what volume would XYZ be indifferent between making the crates and purchasing the crates from the outside supplier?