1. Mindanao Company needed to determine whether to manufacture 8,000 units of X component in-house or to buy those units from a supplier at price of $22 per unit. The cost information for in-house manufacturing 8,000 units of X component is provided below.

Cost components	$
Direct materials	80,000
Direct labour	56,000
Fixed overhead	32,000
Variable overhead	24,000

The fixed overhead will remain the same whether X component is manufactured in-house or purchased externally.

Required:

1. Calculate the relevant costs for in-house manufacturing of X and buying it from outside supplier. Show calculations per unit and for all units Mindanao Company was considering to manufacture or buy. Provide your comments explaining which alternative is more cost-effective and by how much?
2. Now assume that 50% of Mindanao Companys fixed overhead can be avoided if X component is purchased externally. Under this condition, calculate the relevant costs. Based on your quantitative and qualitative analysis, explain whether you would suggest Mindanao Company to manufacture X component in-hose or buy it externally.