Amazfit Sdn Bhd is a manufacturer of smart watches under a brand name of Amazfit. The company produces several types of smart watches for different occassions namely Amazfit T-Rex, Amazfit GTS and Amazfit Neo. The most demanding product in the market is Amazfit T-Rex and this product require special component called lithium-ion (Li-ion) battery. Each Amazfit T-Rex require 2 units of Li-ion battery and the expected sales and production of Amazfit T-Rex for the next period is 2,500 units Currently, the Li-ion battery is supplied by external supplier, Garmin Sdn Bhd. Due to the volatility of supply for Li-ion battery in the market during pandemic Covid 19, the directors of Amazfit Sdn Bhd is considering to produce the Li-ion battery internally. The research and development department has identified and estimated the following cost in producing one unit of Li-ion battery Cost Requirements Direct material RM5/gram 5 gram Direct labour RM10/hour 2 hours Direct expenses : Hire of special machine RM5/hour 3 hours Variable overhead (20% of direct material cost) Fixed overhead per annum RM75,000 Testing & Control per annum RM 5,000 The production manager however, disagrees with this idea because the labour in the company is currently work at full capacity. In order to manufacture Li-ion battery internally the company has to use the same production line that currently produces Amazfit Neo. Below is the data relating to Amazfit Neo: Amazfit Neo (RM) Selling price 400.00 Variable cost: Direct material 200.00 Direct labour (4 hours x RM25/hour) 100.00 Selling & distribution 10% of selling price If Amazfit Sdn Bhd decided to manufacture Li-ion battery internally, the production of Amazfit Neo has to be discontinued. a. Estimate the total contribution margin loss from the sales of Amazfit Neo if the company decided to produce Li-ion battery internally. (4 marks) b. Determine the total relevant cost of making and total relevant cost of buying 5,000 units of Li-ion battery (7 marks) c. Advise on the best decision to the company based on your calculation in (b) above. (2 marks) Amazfit Sdn Bhd is a manufacturer of smart watches under a brand name of Amazfit. The company produces several types of smart watches for different occassions namely Amazfit T-Rex, Amazfit GTS and Amazfit Neo. The most demanding product in the market is Amazfit T-Rex and this product require special component called lithium-ion (Li-ion) battery. Each Amazfit T-Rex require 2 units of Li-ion battery and the expected sales and production of Amazfit T-Rex for the next period is 2,500 units Currently, the Li-ion battery is supplied by external supplier, Garmin Sdn Bhd. Due to the volatility of supply for Li-ion battery in the market during pandemic Covid 19, the directors of Amazfit Sdn Bhd is considering to produce the Li-ion battery internally. The research and development department has identified and estimated the following cost in producing one unit of Li-ion battery Cost Requirements Direct material RM5/gram 5 gram Direct labour RM10/hour 2 hours Direct expenses : Hire of special machine RM5/hour 3 hours Variable overhead (20% of direct material cost) Fixed overhead per annum RM75,000 Testing & Control per annum RM 5,000 The production manager however, disagrees with this idea because the labour in the company is currently work at full capacity. In order to manufacture Li-ion battery internally the company has to use the same production line that currently produces Amazfit Neo. Below is the data relating to Amazfit Neo: Amazfit Neo (RM) Selling price 400.00 Variable cost: Direct material 200.00 Direct labour (4 hours x RM25/hour) 100.00 Selling & distribution 10% of selling price If Amazfit Sdn Bhd decided to manufacture Li-ion battery internally, the production of Amazfit Neo has to be discontinued. a. Estimate the total contribution margin loss from the sales of Amazfit Neo if the company decided to produce Li-ion battery internally. (4 marks) b. Determine the total relevant cost of making and total relevant cost of buying 5,000 units of Li-ion battery (7 marks) c. Advise on the best decision to the company based on your calculation in (b) above. (2 marks)