P$11\mathrm{.}49$B $($LO $2,3)$ The management of Dunham Manufacturing Company has asked for your help in deciding whether to continue manufacturing a part or to buy it from an outside supplier. The part, called Tropica, is a component of Dunham$$s finished product.

An analysis of the accounting records and the production data revealed the following information for the year ended December $31,2022$:

The machinery department produced $40,000$ units of Tropica.

Each Tropica unit requires $15$ minutes to produce. Three people in the machinery department work full$-$time $(2,500$ hours per year each$)$ producing Tropica. Each person is paid $$15$ per hour.

The cost of materials per Tropica unit is $$3.$

Manufacturing costs directly applicable to the production of Tropica are as follows: indirect labour, $$6,000$; utilities, $$1,500$; depreciation, $$2,000$; property taxes and insurance, $$2,000.$ All of the costs will be eliminated if the company purchases Tropica.

The lowest price for Tropica from an outside supplier is $$6$ per unit. Freight charges would be $$0\mathrm{.}50$ per unit, and the company would require a part$-$time receiving clerk at $$10,000$ per year.

If it purchases Tropica, Dunham will use the excess space that becomes available to store its finished product. Currently, Dunham rents storage space at approximately $$1\mathrm{.}50$ per unit stored per year. It stores approximately $6,000$ units per year in the rented space.

Instructions

Prepare an incremental analysis for the make$-$or$-$buy decision. Should Dunham make or buy the part? Why?

a$.$ NI decrease: $$19,000$

Prepare an incremental analysis, assuming the released facilities $($freed$-$up space$)$ can be used to produce $$15,000$ of net income in addition to the savings on the rental of storage space. What decision should the company make now?

b$.$ NI decrease: $$4,000$

What non$-$financial factors should it consider in the decision?

Determine whether a product should be sold or processed further.