Appendix Four (Make or Buy) Objective: Since the demand for packaging material will be high, CC is exploring the possibility of buying the packaging materials from an outside supplier or buying an equipment to produce them inhouse. Scenario: New printing and fabrication equipment can be bought for $1,800,000. The equipment would have a five-year useful life and $ 400,000 salvage value. Alternately, an outside supplier has offered to supply the packaging material at $ 135 per skid under a five-year contract. The cost card for the packaging material is as under for the current level of activity of 45,000 skids Item Direct materials Direct labour Overhead Total cost per unit Breakdown of overhead cost is as under: Supplies Amount $50.00 $40.00 $ 30.00 $ 120.00 Supervision Depreciation General Overhead $ 10.00 10.00 15.00 25.00 Supervision is directly traceable to manufacturing activity.