A company is considering the alternatives of either purchasing a component from an outside supplier or producing the component itself. The estimated costs to the company of producing the component are as follows

The outside supplier has quoted a figure of £500 per component for an order of 100 components.
This is equivalent to three months supply: The company currently manufactures 400 components per annum.

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() Direct labour 100 Direct materials 300 Variable overheads 50 Fixed overheads 200 650