Aqua Ltd produces and sells wheelchairs. This year's expected production is 20,000 units. Currently, Aqua Ltd makes the chains for its wheelchairs. The management accountant of Aqua reports the following costs for making the 20,000 wheelchair chains: Aqua Ltd has received an offer from an outside vendor to supply any number of chains Aqua Ltd requires at $20 per chain. The following additional information is available: - Inspection, set-up and materials-handling costs vary with the number of batches in which the chains are produced. Aqua Ltd produces chains in batch sizes of 1,000 units. Aqua Ltd will produce the 20,000 units in 20 batches. - Aqua Ltd rents the machine used to make the chains. If Aqua Ltd buys all of its chains from the outside vendor, it does not need to pay rent on this machine. Required (show your workings): (a) (b) Assume that if Aqua Ltd purchases the chains from the outside vendor, the facility where the chains are currently made will remain idle. On the basis of financial considerations alone, should Aqua Ltd accept the outside vendor's offer at the anticipated production and sales volume of 20,000 units? Assume that if the chains are purchased from outside, the facilities where the chains are currently made will be used to upgrade the wheelchairs by adding mud flaps and reflectors. As a consequence, the selling price of wheelchairs will be raised by $30. The variable cost per unit of the upgrade would be $24, and additional tooling costs of $100,000 would be incurred. On the basis of financial considerations alone, should Aqua Ltd make or buy the chains, assuming that 20,000 wheelchairs are produced and sold? (c) The sales manager at Aqua Ltd is concerned that the estimate of 20,000 units may be high and believes that only 16,000 units will be sold. Production will be cut back, freeing up workspace. This space can be used to add the mud flaps and reflectors whether Aqua Ltd buys the chains or makes them in-house. At this lower out-put, Aqua Ltd will produce the chains in 16 batches of 1,000 units each. On the basis of financial considerations alone, should Aqua Ltd purchase the chains from the outside vendor? 15m 20m 15m