Company A has to decide whether to manufacture Product X internally or to buy from outsiders at Rs.11. Annual demand of product X is 10,000.

The details of Company A internal production costs are as follows:

Rs. per unit

Direct material 2.00

Direct labour 3.00

Variable production overhead 0.50

Fixed production overhead (2 hours x 0.25 per hour) 0.50

Fixed production overhead is calculated on the basis of 200,000 direct labour horus. 60% of fixed overhead is eliminated if company purchase from outsider.

Company can produce 20,000 units of product Y if product X would be purchase from outsider and earned a contribution of Rs. 8 per unit.

Company also rent their premises portion to other company at an annual rental of Rs.30,000

Required:

Shoud Company manufacture product X internally or buy from outside supplier?