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2.8 CVP Analysis - Make vs Buy - Key Factor, Indifference Point capabile s engaged in the manufacture of plastic bottles of a standard size. The Factory has 5 machines of identical size, each Company had received an offer from another Company for manufacture of 40,000 units of a plastic moulded toy. The Price per Toy is? 30 and the Variable Cost is 24 each. In case of the Company taking up the job, it has to meet the expenses of making an special mould required for the manufacture of the Toy. The cost of the mould is * 1,00,000. The Company's time study analysis shows that the machines can produce only 16 toys per hour. The Company has a total capacity of 10,000 hours during the period in which the toy is required to be manufactured. The Fixed Costs excluding the cost of construction of the mould during the period will be 10 Lakhs. The Company has an order for the supply of 3,00,000 bottles during the period. Required: Do you advise the Company to take up the order for manufacturing plastic moulded toys during the time when it has an order in its book for the supply of 3,00,000 bottles? 2. If the order for the supply of bottles increases to 4,00,000 bottles, will you advise the Company to accept the order for the supply of plastic moulded toys? State the reasons. 3. An Associate Company of JM Ltd has idle capacity and is willing to take up the whole or part of the manufacturing of the plastic moulded toys on sub-contracting basis. The Sub-Contract Price inclusive of the cost of construction of mould is per toy. Determine the minimum expected excess machine hour capacity needed to justify producing any portion of th toy order by the Company itself rather than sub-contracting. 28