Question 5 (12 marks) Teny Company makes a bike called B1 and buys 350,000 units of part 007 required to make the bike for $20 per unit from an external supplier. The external supplier advised Terry Company that there will be a 10% increase to the price of part 007 from next year. Terry Company has the capacity to produce part 007 for $25 per unit ($15 for direct materials, $5 for direct labour, $3 for variable overhead and $2 for fixed overhead). If Teny Company continues to purchase part 007 from the external supplier, $500,000 of Terry Company's fixed costs will continue to be incurred. Tenry Company currently sells bike B1 for $450 each and the total cost to produce bike B1 is $400 ($200 for direct materials, $100 for direct labour, $70 for variable overhead and $30 for fixed overhead. Required: 1. What will be the total cost of purchasing 350,000 units of part 007 from the external supplier next year? 2. What will be the total cost of making 350,000 units of part 007 internally by Terry Company? 3. Should Terry Company make part 007 or should it continue to purchase from the external supplier? Why? 4. A new customer called Kenry has approached Terry Company to purchase 5,000 units of bike B1 for $365 each. If Terry Company accepts the special order, its fixed overhead costs and normal production levels will not be affected. Should Terry Company accept the special order? Provide detailed calculations to support your answer. (2 +4 +2 +4 = 12 marks) Start your answer here