**PLS SHOW WORKINGS. HAND WRITTEN ONLY**

PART B Elias Gerek has been manufacturing its own seats for its bicycles. The company is currently operating at 100% capacity, and variable manufacturing overhead is charged to production at the rate of 30% of direct labour cost. The direct materials and direct labour cost per unit to make the bicycle seats are RM15 and RM18, respectively. Normal production is 250,000 seats per year. A supplier offers to make the seats at a price of RM40 each. If the bicycle company accepts this offer, all variable manufacturing costs will be eliminated, but the RM420,000 of fixed manufacturing overhead currently being charged to the bicycle seats will have to be absorbed by other products. Required: a) Illustrate by using the incremental analysis for the decision to make or buy the bicycle seats. (6 marks) b) Should Elias Gerek buy the seats from the outside supplier? Justify your answer. (1 mark)