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Godfred Ltd manufactures toys and their parts. The following are the total processing costs for each unit. GHC Variable Factory Overhead Fixed factory overhead Direct

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Godfred Ltd manufactures toys and their parts. The following are the total processing costs for each unit. GHC Variable Factory Overhead Fixed factory overhead Direct material 3,500 Direct labour 6,000 The same units are available in the local market. The purchase price of the component is GHC 11,000 per unit. The fixed overhead would continue to be incurred even when the component is bought from outside, although there would be reduction to the extent of GHC 1,500 per unit. However, this reduction does not occur, if the machinery is rented out. Required: i). should the part be made or bought, considering that the present capacity when released would remain idle? ii) In case, the released capacity can be rented out to another manufacturer for GHC 2,150 per unit, what should be the decision? 6,000 20,000

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