Harrys Pies currently makes the crust in-house for the various pies it sells at its stores. It uses 60,000 crusts annually in the production of its bestselling pies. The costs to make the crusts are:

Materials	$ 0.23 per crust
Labour	$ 0.35 per crust
Variable Overhead	$ 0.25 per crust
Fixed Overhead	$ 0.27 per crust

A nearby bakery has offered to sell the crusts for $0.85 each to Harrys Pies. If the crusts are purchased, 30% of the fixed overhead could be avoided.

1. Calculate the relevant costs for Harrys Pies if it continues to make its own pies. (2 marks)
2. Calculate the relevant costs for Harrys Pies if it purchases from the nearby bakery. (2 marks)
3. If Harrys Pies accepts the offer, calculate the effect on profit. (2 marks)
4. Should Harrys Pies accept or reject the bakerys offer? (1 mark)