Current per unit costs of PCBs

	HT Prime ($)	HT Maximus ($)	HT Zenith ($)
Direct materials	46	72	94
Direct Labour	26	26	13
Overhead	25	38	75
cost per board	97	136	182

And these are the costings for MKA 1919 (See below). We typically produce 50,000 units per month but we have the capacity to produce up to 70,000 units if required. MHLVs offer for each unit is really very good. I seriously think we should accept it. At $3.85 per unit it makes it really difficult for us to even come close. Right now, we are producing each MKA 1919 for $5.16. Tell me why we should not accept MHLVs offer? I am sure that you can see it makes sense and will ultimately save us money!

	MKA 1919 (50,000 units) ($)
Direct materials	125,000
Direct labour	30,000
Manufacturing overhead *	60,000
General and administrative overhead**	43,000
Total costs	258,000

* Manufacturing overhead is applied on the basis of direct labour costs.

Fixed overhead = 75% of direct labour costs

Variable overhead = 125% of direct labour costs

Manufacturing overhead rate = 200% of direct labour costs

** General and administrative overhead is applied at 20 percent of the total costs of direct material, direct labour and manufacturing overhead.

REQUIRED

Whether to manufacture or purchase MKA 1919?