ALL. WORKTNG MLST BE SHOWN IN THE ANSWER BOOK SEC.TION A: l'roblem-solving Questions (Total 40 marks) A NSWFR ANY TWOQUFSTIONS IN THIS SECTION QUESTION 1 Otto Manufactaring Company sells cloctric fan. The estimated anmual szles and production wolume would be 8,000 units. Based on 8,000 units, the accounting department has developed the following awele per unit or the manlel: Cou las lo give klalu the fan design xpecilisalions wilh the oflit Lf Otio decides to buy from Idabo, the plant manager would be serminated. Rent costs of $2,000 are allocacd to products oe the basis of the floor spoce used for manufacturing the prodact. If the production is discontinued, the space currently used to manufacture it would become available. The company could then use the space for storage and save $4,000 curnetly paid for outside storage. All the allocatod owerhesd costs would continue. RFQLIIRED: 1) Advise if Otio should make or buy the fan based on qantitative approach? Show all the relevant items in the following format: (8 marks) lisms 2) Suppose the annual $70,000 depreciation on suipmert that was purchased for $700,000 and is just abont at the end of its ten-ycar life. New roplacememt equipment will also cost $700,000 and is also expected to last ten years without any residual value. I I this cace, how would it change the ootal relevant manafbcturing costs in your amower (1)? should tho make or buy? Explain (4 marks) 3) List ANY TWQ qualitative factoss that Qhto should consider in determining the make or buy decision. (3 marks) 4) Relcant costs concopt is commonly veed by mansgers in making busincss decisions. (5 marks) a) Fxplain "spcial cecte" b) Outline the fimancial justifications required for managers in making accepting a special orders dscisions