"That old equipment for producing subassemblies is worn out," said Bruce Truesdale, president of Truesdale Company. "We need to make a decision quickly." The company is trying to decide whether it should rent new equipment and continue to make its subassemblies internally, or whether it should discontinue production of its subassemblies and purchase them from an outside supplier. The alternatives follow: Alternative 1: Rent new equipment for producing the subassemblies for $60,000 per year. Alternative 2: Purchase subassemblies from an outside supplier for $7 each. Truesdale Company's current costs per unit of producing the subassemblies internally (with the old equipment) are given below. These costs are based on a current activity level of 40,000 subassemblies per year: Direct materials Direct labor Variable overhead Fixed overhead ($0.75 supervision, $1.00 depreciation, and $4 general company overhead) $2.35 3.00 0.80 5.75 Total cost per unit $11.90