In my opinion, we ought to stop making our own drums and accept that outside suppher's...

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"In my opinion, we ought to stop making our own drums and accept that outside suppher's offer" said Wim Niewandt, managing director of Antilles Refining, NV, of Aruba. "At a price of $17 per drum, we would be paying $6 85 less than it costs us to manufacture the drums in our own plant. Since we use 50,000 drums a year, that would be an annual cost savings of $342.500 Antilles Refining's current cost to manufacture one drum is given below based on 50,000 drums per year Direct materials Direct labor variable overheat Fixed overhead ($2.9 general company overheat, $1.65 depreciation, and 10.30 supervision) Total cast per dru 1.50 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are Alternative 1 Rent new equipment and continue to make the drums. The equipment would be rented for $135,000 per year Atemative 2: Purchase the drums from an outside supper at $17 per drum The new equipment would be more efficient than the equipment that Antles Refining has been using end, according to the manufacturer, would reduce direct labor and variable overhead costs by 40% The old equipment has no resale value Servon cost $45.000 per year) and direct matenals cost per drum would not be affected by the new equipment. The new equipment's capacity would be 125.000 drums per year The company's total general company overhead would be unaffected by this decision Required 1 Assuming that 10.000 drums are needed each year, what is the teancial advantage idisadvantages of buying the drums from an outside supplert 2. Assuming that 100,000 drums are needed each year what is the financial advantage (disadvantage) of buying the drums from an butude suppler 3 Assuming that 125.000 drums are needed each year, what in the friancial advantage jasadvantages of buying the drums from an outside supplier (For all requirements, enter any "disadvantages" as a negative value. Do not round intermediate calculations. Do not leave any cells blank O Answer is complete but not entirely correct Po 000 121000 "In my opinion, we ought to stop making our own drums and accept that outside suppher's offer" said Wim Niewandt, managing director of Antilles Refining, NV, of Aruba. "At a price of $17 per drum, we would be paying $6 85 less than it costs us to manufacture the drums in our own plant. Since we use 50,000 drums a year, that would be an annual cost savings of $342.500 Antilles Refining's current cost to manufacture one drum is given below based on 50,000 drums per year Direct materials Direct labor variable overheat Fixed overhead ($2.9 general company overheat, $1.65 depreciation, and 10.30 supervision) Total cast per dru 1.50 A decision about whether to make or buy the drums is especially important at this time because the equipment being used to make the drums is completely worn out and must be replaced. The choices facing the company are Alternative 1 Rent new equipment and continue to make the drums. The equipment would be rented for $135,000 per year Atemative 2: Purchase the drums from an outside supper at $17 per drum The new equipment would be more efficient than the equipment that Antles Refining has been using end, according to the manufacturer, would reduce direct labor and variable overhead costs by 40% The old equipment has no resale value Servon cost $45.000 per year) and direct matenals cost per drum would not be affected by the new equipment. The new equipment's capacity would be 125.000 drums per year The company's total general company overhead would be unaffected by this decision Required 1 Assuming that 10.000 drums are needed each year, what is the teancial advantage idisadvantages of buying the drums from an outside supplert 2. Assuming that 100,000 drums are needed each year what is the financial advantage (disadvantage) of buying the drums from an butude suppler 3 Assuming that 125.000 drums are needed each year, what in the friancial advantage jasadvantages of buying the drums from an outside supplier (For all requirements, enter any "disadvantages" as a negative value. Do not round intermediate calculations. Do not leave any cells blank O Answer is complete but not entirely correct Po 000 121000