(d) Blenders and food processors use the same type of electric motor and each unit requires...

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(d) Blenders and food processors use the same type of electric motor and each unit requires one electric motor that is currently purchased from an external supplier for $13.8 per unit. To meet the annual market demand for both products, currently 25,000 motors are purchased each year. Top management is now considering whether GCI should make the electric motor internally or continue to purchase from the external supplier. The management accountant has gathered the cost information for making the electric motor: Direct materials Direct labor Variable overhead $ 4 SASASA 432 $3 $2 There are two options to provide the capacity for making the electric motors: 1. Lease the needed space and equipment at a cost of $8,000 per month and spend $4,000 per month for a supervisor. No other fixed expenses are incurred. 2. Drop the air fryer product line which currently earns the company a contribution margin of $45,000 a year. The existing equipment and space can be adapted to produce the electric motors, and the direct fixed costs at the production department will remain at $63,500 per year. Dropping the air fryer product line will decrease the sales of blender by 2%. The sales of food processor will not be affected. Which course of action should GCI choose? Support your recommendation with appropriate calculations and qualitative considerations. (16 marks) (d) Blenders and food processors use the same type of electric motor and each unit requires one electric motor that is currently purchased from an external supplier for $13.8 per unit. To meet the annual market demand for both products, currently 25,000 motors are purchased each year. Top management is now considering whether GCI should make the electric motor internally or continue to purchase from the external supplier. The management accountant has gathered the cost information for making the electric motor: Direct materials Direct labor Variable overhead $ 4 SASASA 432 $3 $2 There are two options to provide the capacity for making the electric motors: 1. Lease the needed space and equipment at a cost of $8,000 per month and spend $4,000 per month for a supervisor. No other fixed expenses are incurred. 2. Drop the air fryer product line which currently earns the company a contribution margin of $45,000 a year. The existing equipment and space can be adapted to produce the electric motors, and the direct fixed costs at the production department will remain at $63,500 per year. Dropping the air fryer product line will decrease the sales of blender by 2%. The sales of food processor will not be affected. Which course of action should GCI choose? Support your recommendation with appropriate calculations and qualitative considerations. (16 marks)