Moideen Company manufactures medical accessories and disposables. Due to Covid 19 pandemic, the company was forced to reduce its business operations. At this situation, the company receives an offer from Mubarak Company for 5000 units of materials for RO 27 each. If Moideen Company accepts the offer, some of the facilities presently used to manufacture this item could be used to help with the manufacture of face masks, thus saving RO 40000 in relevant cost in its manufacture and eliminating RO 3 per unit of the fixed

factory overhead applied to medical cost per unit for 5000 units are:

Direct material

Direct labor

Variable factory overhead Fixed factory overhead Total unit cost

accessories and disposables. Companys cost of manufacture showing

RO 2 RO 12 RO 5 RO 7 RO 26

(A) Should the Moideen Company make or buy the product? Support your decision.

B) If the company fails to use the freed capacity, will your decision change? Justify your answer.