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1.4 Make or Buy Decision - Utilisation of Spare Capacity vs Leasing out is a multiple product manufacturer. One product line consists of motors and the Company produces three different models. X RTP.M 09 currently considering a proposal from a Supplier who wants to sell the Company, Blades for the motor line. I The Company currently produces all the blades it requires. In order to meet the customer's needs, X currently produces three different blades for each motor model (nine different blades). The Supplier would charge * 25 per blade, regardless of blade type. For the next year, X has projected the costs of its own blade production as follows (based on projected volume of 10,000 units): Particulars Amount (in) T 75,000 65,000 Wariable Overhead 55,000 rixed Overhead: Factory Supervision 35,000 Other Fixed Cost 65,000 Total Production Costs 2,95,000 ssume: The equipment utilized to produce the blades has no alternative use and no market value. Space occupied by blade production will remain idle if the Company purchases rather than makes the blades. Factory Supervision Costs reflect the salary of a Production Supervisor who would be dismissed from the Firm if blade production ceased. Direct Materials ruirect Labour Required: Find the Profit/ Loss of purchasing (rather than manufacturing) the blades required for motor production in the next year. Determine the level of motor production where X would be indifferent between buying and producing the blades. If the future volume level were predicted to decrease, would that influence the decision? For this part only, assume that the space presently occupied by blade production could be leased to another Firm for 45,000 per year. How would this affect the make or buy decision? 1. Make or Buy decision