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Abdeen Company is trying to decide whether it should . Rent new equipment and continue to Make its subassemblies internally; or . Discontinue production and Buy the subassembly from an outside supplier The Company could rent the new equipment for producing the subassemblies at a cost of $70,000 pur year. Alternatively, they could buy the subassemblies from an Outside Supplier. The supplier has offered to provide the (40,000) subassemblies for SILS0 each under a five-year contract. Abdeen Company's current costs per unit of making the subassemblies internally (witlh the old equipment) are below. The costs are based on a current activity level of 40,000 subassemblies per year 3.00 $ 4.20 0.60 Direct Materials Direct Labour Variable Overhead Fixed Overhead ($0.75 supervision, S0.90 depreciation, and $2 general company overhead) Total Cost per Unit $3.65 $1145 . The rented equipment would be more efficient and would reduce Direct Labour costs and variable-overhead costs by 25% each; Supervision cost (of $30,000 per year/$0.75) and Direct Materials cost per unit would not be affected by the rented new equipment; .If Abdeen decides to buy the subassemblies from the outside Supplier then they can use their current space and the current equipment to produce a new subassembly product (new 40,000 units as well) with a Contribution Margin of S2.50 per unit; The Company's total General Overhead would not be affected by this decision. . Required: Assume you need (40,000) subassemblies each year Prepare an Analysis of the two alternatives, either Renting the new Equipment and continuing to Make the subassembly or Buying the subassembly from the Outside Supplier. (8 marks) Show Work

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