Q) Mita Company currently manufactures a subassembly for its main product. The costs per unit are as follows.

Direct Materials	$4.00
Direct Labour	$30.00
Variable overhead	$15.00
Fixed Overhead (allocated)	$25.00
Total	$74.00

Excel Co. has contacted Mita Company with an offer to sell it 5000 subassemblies for $55 each.

Required

1. Why is it important to identify whether any of the fixed overhead is avoidable or unavoidable in order to assess the outsourcing of the subassembly? Explain. (2 marks)

2. Should Mita Company make or buy the subassemblies? Create a schedule that shows the quantitative differences per unit and in total values between the two alternatives. Assume all fixed overhead is unavoidable. Explain and show your calculations (8 marks)

3. What if $50 000 of fixed overhead would not be incurred if Mita Company outsources the assemblies, would it change your decision in (b) above? Explain and show your calculations. (8marks)

d. What qualitative factors should the accountants and managers of Mita Company consider in their make or buy decision (2 marks)

(20 marks) Total (250 words not including calculations)