2. In (c) (ii), assume that the company could produce 1,000 units of product B using the machine hours to be released from product A if it is outsourced. Product B can be sold at 100 per unit, and the total variable costs needed to produce it is the same as product A. Indicate if the company should make or buy product A based on the revised monetary difference of the two options

3. XYZ Ltd. has been evaluating whether it will continue to manufacture product A in house or outsource it. The unit cost of producing product A is as follows:

   Direct materials 10 Direct labour 5 Variable manufacturing 15 overhead

   Fixed manufacturing overhead 50 Total 80

   The lease payment for machinery (i.e., fixed cost), which is needed to produce product A internally, is 5,000 per annum and cannot be cancelled. The company produces and sells 4,200 units of product A per year. After an overseas supplier submitted a bid of 32 per the same product, some management members felt that they could reduce costs by outsourcing the production of product A. If product A is purchased from the supplier, its unused factory space could be leased to another company for 1,000 per year.