OutTel Ltd manufactures plastic bottles. On average it produces and sells 3,600,000 plastic bottles per year. The factory can manufacture a maximum of 4,000,000 units per year. Further details of the plastic bottles are as follows: Selling Price Variable Cost Fixed Cost $3 per unit $2 per unit $3,000,000 per year Consider the following independent scenarios: Scenario A Lacko Ltd has approached OutTel Ltd to purchase 800,000 plastic bottles. As this is an unusually large order, Lacko Ltd is only willing to pay a discounted total price of $2,200,000. They have also requested for all of the bottles to be modified to include the logo of their company. This will incur an additional $0.20 variable cost per unit. OutTel Ltd has identified that a new engraving machine costing $20,000 needs to be acquired in order to do the modification. At the present moment, there would be no other foreseeable use for this machine. Scenario B Scientex Ltd has approached OutTel Ltd to produce all 3,600,000 plastic bottles for the entire year for $2.10 per unit. As the buy option includes all necessary manufacturing, packaging and transportation costs, Outlet Ltd can reduce $400,000 of its fixed costs. Required: a) For Scenario A, should OutTel accept the special order? Show your workings. (5 marks) b) For Scenario B, should OutTel continue to manufacture the plastic bottle or buy it? Show your workings. (5 marks) OutTel Ltd manufactures plastic bottles. On average it produces and sells 3,600,000 plastic bottles per year. The factory can manufacture a maximum of 4,000,000 units per year. Further details of the plastic bottles are as follows: Selling Price Variable Cost Fixed Cost $3 per unit $2 per unit $3,000,000 per year Consider the following independent scenarios: Scenario A Lacko Ltd has approached OutTel Ltd to purchase 800,000 plastic bottles. As this is an unusually large order, Lacko Ltd is only willing to pay a discounted total price of $2,200,000. They have also requested for all of the bottles to be modified to include the logo of their company. This will incur an additional $0.20 variable cost per unit. OutTel Ltd has identified that a new engraving machine costing $20,000 needs to be acquired in order to do the modification. At the present moment, there would be no other foreseeable use for this machine. Scenario B Scientex Ltd has approached OutTel Ltd to produce all 3,600,000 plastic bottles for the entire year for $2.10 per unit. As the buy option includes all necessary manufacturing, packaging and transportation costs, Outlet Ltd can reduce $400,000 of its fixed costs. Required: a) For Scenario A, should OutTel accept the special order? Show your workings. (5 marks) b) For Scenario B, should OutTel continue to manufacture the plastic bottle or buy it? Show your workings