Question 5 Bebo Co. manufactures and sells a good range of components that are used for heavy machinery by many companies. The Procurement manager of Bebo Co. was recently approached by another leading component manufacturer, Mechanic Ltd who had offered to make three (3) of Bebo's components (ComA, ComB and ComC), at their plant in Penang. The following cost and price information for the three components are provided below: ComA ComB ComC Production level (Units) 7,000 6,000 5,000 $ S Direct Material/unit 14.00 18.00 13.00 Direct Labour/unit 16.00 15.00 10.00 Variable production overhead/unit 8.00 9.00 11.00 Fixed production overhead/unit 9.00 11.00 8.00 Selling Price/unit 90.00 95.00 80.00 External Price/unit offered by Mechanic Ltd 37.00 45.00 32.00 Required: a) Calculate the total contribution and total profit for each component and for the company as a whole, if the company decides to manufacture in-house all the three components. (8 marks) b) Recommend to the management of Bebo Co. whether any components should be outsourced, purely on financial grounds (6 marks) c) How will your recommendation in (b) above, affect the total profit and by how much? (3 marks) d) Explain the TWO (2) other factors besides financial reasons, that Bebo management should consider before making a final decision on whether to make or buy the components? e) Discuss TWO (2) factors that have led to a growth in the use of outsourcing? (4 marks) (4 marks) (Total: 25 marks)