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Racer Industries is currently purchasing Part No.76 from an outside supplier for $90 per unit....

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Accounting

Racer Industries is currently purchasing Part No.76 from an outside supplier for $90 per unit. Because of supplier reliability problems, the company is considering producing the part internally in an idle manufacturing plant. Annual volume over the next 6 years is expected to total 290,000 units at variable manufacturing costs of $85 per unit.
Racer must acquire $90,000 of new equipment if it reopens the plant. The equipment has a 6-year service life, a $15,000 salvage value, and will be depreciated by the straight-line method. Repairs and maintenance are expected to average $6,200 per year in years 4-6, and the equipment will be sold at the end of its life.
Year FV of $1 at
15% FV of an ordinary annuity at 15% PV of $1 at
15% PV of an ordinary annuity at 15%
11.1501.0000.8700.870
21.3232.1500.7561.626
31.5213.4730.6582.283
41.7494.9930.5722.855
52.0116.7420.4973.352
62.3138.7540.4323.784
Required:
Use the net-present-value method (total-cost approach) and a 15% hurdle rate to determine whether Racer should make or buy Part No.76. Ignore income taxes. (Negative amounts should be indicated by a minus sign. Round your answers to the nearest dollar amount.)

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