Direct materials $ 10.40 Direct labor 6.50 Variable overhead 1.50 Fixed overhead ($2.90 general company overhead, $1.65 depreciation, and $0.90 supervision) 5.45 Total cost per drum $ 23.85

Check my work 5 Alternative 1: Rent new equipment and continue to make the drums. The equipment would be rented for $135,000 per year. Alternative 2: Purchase the drums from an outside supplier at $17 per drum. 30 points eBook 101 Hint Print The new equipment would be more efficient than the equipment that Antilles Refining has been using and, according to the manufacturer, would reduce direct labor and variable overhead costs by 40%. The old equipment has no resale value. Supervision cost ($45,000 per year) and direct materials 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 50,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 2. Assuming that 100,000 drums are needed each year, what is the financial advantage (disadvantage) of buying the drums from an outside supplier? 3. Assuming that 125,000 drums are needed each year, what is the financial advantage (disadvantage) 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.) References Mc Graw Hill Production Needs (in number of drums) 50,000 100,000 125,000 Financial advantage (disadvantage) of buying the drums < Prev 5 of 5 Next