Make - A. and Partners LTD wishes to decide whether to manufacture or buy 20,000 components. The following information has been made available: Total - Direct materials 150,000 Direct labour 70,000 Variable overhead costs 40,000 Fixed overhead costs 60,000 Non-manufacturing overhead costs 30,000 Difference Buy - - Direct materials Direct labour IF A. and Partners LTD buy 20,000 components 10 each, then: 1 75% of the Direct labour is made redundant 2 50% of the Direct materials become avoidable 3 25% of the Variable Overheads become avoidable 4 Fixed Overhead will be reduced by 30,000 5 Non-manufacturing Overheads remain unchanged Assume that the manufacturing capacity has no alternative uses. Variable manufacturing overhead costs Fixed manufacturing overhead costs Share of non-manufacturing overheads Requirements: a Please state whether the company should manufacture or buy the 20,000 components. (6 marks) b Assume that the company can rent out its manufacturing capacity for 50,000. (4 marks) Should the company make or buy the 20,000 components? Please explain your rationale. Purchasing cost Total costs