ABC is an air-purifier fan model manufactured by PureAir Limited. The company expects to sell 14.000 units of ABC model in the coming year. The model requires a themostat component which allows the fanto automatically work upon a pre-set tenperature. PureAir has hadanintemal production division manufacturing the thermostat component in-house. However, the senior managers are considering outsourcing this componentto an extenal supplier The purchase decision would eliminate all variable costs but some of the fixed costs. Allocated costs will have to be absorbed by other production departments. Variable manufacturing costs to produce each themostat component were: Direct materials per unit: $9 Direct labour per unit: Indirect labour per unit: $0.99 Utilities per unit: $0.90 $7.20 Fixed manufacturing costs to produce each thermostat component were: Costitem Direct Allocated Depreciation $4.950 $4,050 Property taxes 2,250 900 Insurance 4,275 2,025 Mechanica Limitedhas offered PureAir a quote to purchase a similarthermostat component with the following information: 1. The lowest quotation for 14,000 units of themmostat component is $294,000 2. freight and inspection costs would be $0.60 per unit; receiving costs of $4,200 per yearwould be incurred by Pyson. 3. If the themostat conponents are purchased on an ongoing basis, one of Pyson's manufacturing plants would be closed. The facilities would be rented out to produce a net income of $27,000 per year. Required: a) Should PureAir Limited continue to produce the thermostat in-house or purchase the component from Mechanica? Justify your answer with an appropriate incremental analysis. [14 marks] Click or tap here to enter text b) What qualitative factors or strategic issues should the senior management consider in making this make-or-buy decision? [6 marks] Click or tap here to enter text