Pedalling Ltd manufactures bikes for children. The numbers below show the budget for assembly and tailoring departments of this firm, which produce the three following bike components: Frame, wheel and chain. Tailoring department is mechanised only using labour from one specific salary grade. On the contrary, assembly is highly dependent on different labour specialists. Frame 35 Components Wheel 25 Chain 27 Direct costs ( per unit) Manufacturing time (hours per unit) Machining - Tailoring department Direct labour - Tailoring department Direct labour - Assembly department 3 m N 3 4 2 NN 5 2 7 5 9 Variable overheads Fixed overheads Total Tailoring Assembling Department Department () () 340,000 300,000 510,000 150,000 850,000 450,000 Machine time required and available (hours) Labour hours required and available (hours) 85,000 77,000 150,000 REQUIRED: a-What is the overhead absorption rate for tailoring and assembly departments? b- Explain the decision you took to calculate the rates in item 'a' above. - Another firm offered to produce the frame, wheel and chain for the following prices per unit: 53, 57 and 55, respectively. Advise to whether or not outsource these components, considering that fixed overheads do not vary with the volume of activity and spare capacity exists