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Jin Mi Sdn Bhd makes 30,000 units per year of a part it uses in the products it manufactures. The unit product cost of this

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Jin Mi Sdn Bhd makes 30,000 units per year of a part it uses in the products it manufactures. The unit product cost of this part is computed as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Unit product cost RM 15.70 17.50 4.50 14.60 52.30 An outside supplier has offered to sell the company all of these parts it needs for RM51.90 a unit. If the company accepts this offer, the facilities now being used to make the part could be used to make more units of a product that is in high demand. The additional contribution margin on this other product would be RM219,000 per year. If the part were purchased from the outside supplier, all of the direct labor cost of the part would be avoided. However, RM6.20 of the fixed manufacturing overhead cost being applied to the part would continue even if the part were purchased from the outside supplier. This fixed manufacturing overhead cost would be applied to the company's remaining products. Required: (b) Compute the relevant manufacturing cost per unit in making the decision of whether to make or buy the part. (6 marks) (1) Calculate the manufacturing cost savings. (2 marks) (11) Compute the cost of purchasing the part. (2 marks) (111) Calculate the net total advantage (or disadvantage) (in RM) of purchasing the part rather than making it. (5 marks) Compute the maximum acceptable purchase price in RM) that the company is willing to pay an outside supplier per unit for the part if the supplier commits to supplying all 30,000 units required each year. (7 marks)

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