XYZ, Inc., Company currently manufactures doors used in the production of custom homes. Management is interested in outsourcing production of the doors to a reputable manufacturing company that can supply the doors for P90 per unit. Vail incurs the following annual production costs to produce 3,000 doors internally.

	Per Unit	Total
Variable Production Costs:
Direct Materials	P30	P90,000
Direct Labor	15	45,000
Manufacturing OH	20	60,000
Fixed Production Costs:
Factory Building Lease		80,000
Equipment Lease		40,000
Factory Insurance		25,000
Production Supervisors Salary		90,000
Total		430,000

If production is outsourced, all variable production costs, equipment lease costs, and factory insurance costs will be eliminated. The production supervisors salary cost will remain regardless of the decision to outsource or to produce internally because the supervisor recently signed a long-term contract with the company. The factory lease has five years remaining and cannot be terminated before then.

Required:

a. How much is the net advantage (disadvantage) of outsourcing?

b. At what number of units will you be indifferent between outsourcing and making it in-house?

c. Assuming the factory can be leased to another party for P60,000 until the contract runs out, which is now a better alternative? How much is its advantage?