Solo Ltd manufactures four different products namely A, B, C and D; the cost particulars of which are as given below:

Product A B C D

Rs Rs Rs Rs

Selling price per unit 130 155 170 185

Material 80 155 100 120

Labour 20 25 25 30

Variable overheads 10 12 15 10

Fixed overheads 15 23 20 20

Output 4000 2000 3000 3000

Given that the machine capacity is limited, the management of Solo ltd has decided to outsource the part of its production to an outside supplier at Rs115 for A, Rs175 for B,Rs135 for C, and Rs185 for D.

REQUIRED

a) Advise the company which product should be manufactured, and which one should be bought from outside.(8 marks)

b) Based on your answer in part (a), prepare an income statement using marginal costing.(8 marks)

c) Sate four (4) factors that Solo Ltd should take into account before outsourcing its product.