T8-61 ASSESS INFORMATION RELEVANT TO AN OUTSOURCING DECISION (Learning Objective 7) Shyhrete Berisha is the founder and sole owner of Berisha. Analysts have estimated that his chain of home improvement stores scattered throughout the provinces and territories generate about $3 billion in annual sales. But how can Berisha compete with giant Home Depot? Suppose Berisha is trying to decide whether to invest $45 million in a state-of-the-art manufacturing plant in the Okanagan. Berisha expects the plant would operate for 15 years, after which it would have no residual value. The plant would produce Berisha's own line of formica countertops, cabinets, and picnic tables. Suppose Berisha incurred the following unit costs in producing its own product lines: Per Unit Countertops Cabinets Picnic Tables Direct materials $15 $10 $25 Direct labour 10 O1 5 15 Variable manufacturing overhead On 5 2 6 Rather than Berisha making these products, assume that he can buy them from outside suppliers. Suppliers would charge Berisha $40 per countertop, $25 per cabinet, and $65 per picnic table. Whether Berisha makes or buys these products, assume that he expects the following annual sales: Countertops-487,200 at $130 each Picnic tables-100,000 at $225 each Cabinets-150,000 at 575 each If making the products is sufficiently more profitable than outsourcing, Berisha will build the new plant. Shyhrete Berisha has asked your consulting group for a recommendation. Berisha uses the straight-line depreciation method