PROBLEM 1: Apple Corporation is studying whether to continue making or buying I-sight Camera for its Iphone 12. The following data are obtained for analysis:

Unit purchase price offered by a reliable outside supplier P80

Unit production costs:

Direct materials 30

Direct labor 15

Variable overhead 10

Fixed overhead (40% avoidable if the part is purchased outside) 8

Unit variable administration, marketing and distribution expenses 5

Unit fixed expenses 6

Budgeted capacity in units 20,000

Materials handling costs 10% of cost

Rental equipment provided to sub-contractor if purchase P20,000

Potential income from released facilities

Rental income P250,000

Additional contribution on new product 292,000

Profit from special sales 120,000

Required:

a. The savings per unit of the better alternative

b. The indifference purchase price

c. The unit purchase price to realize a savings of P4.40 from buying the part.

d. The amount of rental income needed to generate a savings of P50,000 if the company had decided to purchase the part, and assuming the rental income is the best alternative use of the released facility?