Hebat Products Company currently outsources a microchip that is a component in one of its products. The chips cost RM18 each. The company is considering making the chips internally at the following projected annual production costs:

variable cost per unit	RM
Material cost	3
Labor cost	2
Variable overhead	1
Total Fixed costs	RM
Set-up cost (5,000 units per batch)	25000
Supervisory salaries	37500
Direct factory fixed costs	12000
Other allocated factory fixed costs	8000

The company expects a need of 5,000 chips for its projected annual production. If the company makes the chips, it will have to utilize factory space currently being leased for RM1,500 a month. Assume that supervisory salaries will only be incurred if the company makes the chips internally

Required a. If the company decides to make the chips internally, how much total relevant costs will be higher or lower than the chips to be purchased from outside suppliers?

b. Explain three factors to consider for outsourcing decision.