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Aquarius Limited manufactures bicycles. This year's expected production is 10,000 units Currently, Aquarius makes the chains for its bicycles. Aquarius' management accountant reports the following

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Aquarius Limited manufactures bicycles. This year's expected production is 10,000 units Currently, Aquarius makes the chains for its bicycles. Aquarius' management accountant reports the following costs for making the 10,000 bicycle chains Costs for 10,000 Cost per unit units Direct materials $4.00 $40,000 Direct manufacturing $2.00 20,000 labour Variable manufacturing $150 15,000 overhead (power and utilities) Inspection, setup 2.000 materials handling Machine rent 3,000 Allocated fixed costs of 30.000 plant administration, taxes and insurance TOTAL COSTS $110.000 Aquarius has received an offer from an outside vendor to supply any number of chains Aquarius requires at $8.20 per chain The following additional information is available Inspection setup and materials handling costs vary with the number of batches in which the chains are produced Aquarius produces chains in batoh sizes of 1.000 units Aquarius will produce the 10.000 units in 10 batches Aquarius conto the machine used to make the chains It Aquarius buys all its chain from the outside vendor, does not need to pay rent on this machine Required (show your workings for calculations & write in your own words) (a) Assume that it Aquarius purchases the chains from the outside vendor, the facility where the chans are currently made will remain idle (Le not usedy on the basis of financial factors alone should Aquarius accept the outside vendor's offer at the anticipated production (and sales volume of 10,000 units points) (b) Explain two (2) qualitative factors that Aquis should consider in making the above decision (4 points)

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