Best Mobile Ltd manufactures mobile phones and makes all parts of the mobile phone including the protective screen cover. The cost of making each protective screen cover at a production level of 20,000 units is given below:

Direct materials	$20
Direct labour	$32
Variable overhead costs	$12
Fixed overhead costs	$18
Total unit cost	$82

The fixed overhead cost is direct, and half of the direct fixed overhead cost can be eliminated if the covers are purchase rather than produced. A new supplier of protective screen covers has offered to sell 20,000 covers at a price of $70 per unit to Best Mobile Ltd.

1. Should Best Mobile Ltd accept the offer to purchase the protective screen covers at $70 each? Assume that there are no alternative uses for the manufacturing capacity currently being used to produce the covers. Show all calculations. (7 marks)

Part B (3 marks)

Creative Umbrella Ltd produces umbrellas and is evaluating to purchase a new machine for $400,000 with no residual value. Annual net cash flows (including tax payments) for next 10 years are expected to be $75,000. Calculate the payback period for the new machine. (3 marks)