Sure Grip Inc. manufacture handles for suitcases and other luggage. Attaching each handle to the luggage requires, depending on the size of the luggage piece, between two and six standard fasteners, which the company has historically produced.

The costs to produce one fastener $($based on capacity operation of $4000000$ units per annum$)$ are:

Direct material R$0\mathrm{.}08$

Direct labour R$0\mathrm{.}06$

Variable factory overhead R$0\mathrm{.}04$

Fixed factory overhead R$0\mathrm{.}14$

Fixed factory overhead includes R$200000$ of depreciation on equipment for which there is no alternative use and no market value. The balance of the fixed factory overhead pertains to the salary of the production supervisor, Jeff Witter. Witter has a lifetime employment contract and the skills that could be used to replace Brenda Gibbons, supervisor of floor maintenance. She draws a salary of R$50000$ per annum but is due to retire from the company.

Saratoga Suitcase Co$.$ recently approached Sure Grip with an offer to supply all required fasteners for R$0\mathrm{.}26$ per unit. Anticipated sales demand for the coming year will require $4000000$ fasteners.

Required:

$2\mathrm{.}1$ Identify the costs that are relevant in this outsourcing decision.

$2\mathrm{.}2$ What is the total annual advantage or disadvantage $($in rands$)$ of outsourcing the fasteners rather than making them?

$2\mathrm{.}3$ What qualitative factors should be taken into account in making this decision?