XYZ Company has been manufacturing its own widgets that are used in producing its final product. The cost of manufacturing 10,000 widgets is summarized below.

Direct materials	$25,000
Direct labour	20,000
Variable factory overhead	9,000
Fixed factory overhead	16,000
Total manufacturing costs	$70,000

A supplier offers to produce the widgets that XYZ needs for $5.5 plus freight costs of $0.50per widget. If the company decides to buy from the supplier, 70% of the fixed factory overhead which represents depreciation and insurance costs will continue. 30% will be avoided.

a.) Decide if the company should continue to make the widget or purchase it from the outside supplier. (5 MARKS)

b.) Suppose that if the company chooses to buy the widget, the space used to manufacture the widgets before can be rented out to a tenant for $4,500. Under this scenario, decide if the company should continue to make the widget or purchase it from the outside supplier. (5MARKS)