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PART B 1. Top Brands Manufacturing Sdn Bhd had always made its components in-house. In July 2021, Ah Seng Engineering Sdn Bhd had recently offered
PART B 1. Top Brands Manufacturing Sdn Bhd had always made its components in-house. In July 2021, Ah Seng Engineering Sdn Bhd had recently offered to supply one component, M-2 at a price of RM 25.00. Top Brands Manufacturing Sdn Bhd uses 10,000 units of component M-2 each year. The cost per unit of this component is as follows: Direct materials Direct labour Variable overhead Fixed overhead Total Cost RM 12.00 8.25 4.50 2.00 RM 26.75 Refer to the table above for the information on the unit cost for Top Brands Manufacturing Sdn Bhd. The fixed overhead is an allocated cost. The fixed overhead cost will be incurred irrespective of whether component M-2 is produced or not. 2. Assume now that 75% of Top Brands Manufacturing Sdn Bhd's fixed overhead cost can be eliminated if component M-2 is no longer produced. Required: a) Prepare an incremental analysis for the decision to make or buy component M-2. b) Should Top Brands Manufacturing Sdn Bhd buy or make component M-2? c) List three (3) non-financial factors that management should consider in making the decision
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