The management of X plc is considering next year's production budgets. The budgeted manufacturing cost information is shown as follows:

Direct material 10

Direct labour (5 hours at 3 per hour) 15

Variable overhead (5 hours at 4 per hour) 20

Fixed overhead (3 hours at 8 per hour) 24

Total cost (per unit) 69

An outside supplier has offered to supply the above component at a guaranteed price of 60 per unit for the next three years.

The selling price for the component is 80.

Considering both cost and profit criteria, advise management whether the above component should be purchased from the outside supplier.

Any calculations should be shown and assumptions made, or aspects which may require further investigation should be clearly stated.