QUESTION 3 Misi Sdn Bhd manufactures single design nurse shoes. Currently, the company produces and sells 3,000 units of nurse shoes per month. In producing the nurse shoes, company purchases one of its major components which is the shoe sole from White Sdn Bhd at a price of RM60 per unit. However, the supplier has notified Misi Sdn Bhd that the price of the shoe sole will increase by 80% next month. Misi Sdn Bhd is now considering making the shoe sole internally. The detail estimated cost to produce a unit of the shoe sole is shown below: i. 1 unit of shoe sole requires 8 cm rubber sole sheet and 1.5 hours of direct labour. ii. The price for rubber sole sheet and the rate for direct labour hours are RM4 per cm and RM8 per hour respectively. iii. The production overhead is RM20 per unit where 20% from it are variable. iv. The fixed administration overhead is RM6 per unit. However, if the company decides to produce the shoe sole internally, it should consider the following: i. The labour that will be used to make the shoe sole is currently working in full capacity in the production of leather component. If the shoe sole is to be produced internally, the labour workforce will be taken from the production of the leather component. A unit of leather component will take 3 hours to be completed at the following cost RM Direct material 20 Direct labour 15 Production overhead (60% is fixed) 25 ii. In-house training will be provided to workers and this will cost RM15,000. iii. Company needs to incur extra maintenance cost of RM8,000 to store the shoe sole. iv. Selling price per unit for the leather component is RM70.00 The production manager of Misi Sdn Bhd suggests that it is better for the company to buy the shoe sole as the price offered by the supplier is lower than the cost of making. Required: a. b. Calculate total opportunity cost if Misi Sdn Bhd decides to make shoe sole internally. (3 marks) Compute the total relevant cost of making and relevant cost of buying the shoe sole for next month. (12 marks) Based on your computation in (b) above, advise the management of Misi Sdn Bhd on the best decision to the company. (2 marks) Identify FOUR (4) advantages of buying the components from the external supplier. (4 marks) (Total: 21 marks) C. d