Question 4 (a) Dan Co. produces radio components and has two component divisions. Division 1 currently produces 20,000 units of Component X per year. The costs are as follows and remain unchanged in the future: Per unit Total cost (RM) (RM) Direct materials 24 480,000 Direct labour 20 400,000 Variable production overheads 2 40,000 Fixed production overheads 16 320,000 Share of non-production overheads Total costs 10 200,000 72 1,440,000 There are proposals to outsource 20,000 units of Component X at RM66 per unit and this cost will remain unchanged. If outsourced, direct labour, direct material and variable production overheads will be avoidable. Fixed production overheads will be reduced by RM20,000 per year. Non-production overheads will remain unchanged. There will be no alternative uses of the released capacity. Required: Compute the annual costs of making Component X and buying Component X. Should Division 1 make or buy Component X. Why? (12 marks) (b) Now assume that by outsourcing Component X, the released capacity can be used to make 20,000 units of Component Z at a selling price of RM70 per unit. Direct labour. variable production overheads, fixed production overheads and non-production overheads for Component Z is the same if Component X is manufactured. Direct material for Component Z is RM25 per unit. Required: With the alternative use of the released capacity, what should Dan Co. do now? Why? Support your answer with relevant computations. (13 marks) [Total: 25 Marks]