PEL makes two components, X and Y, for which expected costs are as follows: Production in units 30,000 Variable cost per unit: Rs. Y 20,000 Rs. Direct Material 6 5 Direct Labout 3 9 Variable Factory overhead 1 3 Total variable cost 10 17 Direct labour is paid Rs. 12 per hour. There will be only 19,500 hours of direct labour time available next year, and any additional components must be purchased from an external supplier. Total fixed costs per annum are expected to be as follows: Rs. Incurred for Product X Incurred for Product Y Other fixed costs 40,000 50,000 30,000 120,000 An external supplier has offered to supply units of X for Rs. 12.50 and units of Y for Rs.23. Required Recommend whether PEL should shut down internal production of Component X or Component Y and switch to external purchasing. 2. Recommend the quantities that PELshould make of the components, and the quantities that it should buy externally, in order to obtain the required quantities of both components at the minimum cost. Calculate what the total annual cost will be. Note. To answer part (b), you will need to consider that labour is a limiting factor