Answer the questions below regarding a decision on whether to outsource the production of units where Company A does have full capacity utilization currently. Its current budget sales are $300,000,000 and operating profit is $75,000,000. The potential outsource supplier, Company B, has capacity to produce 250,000 units annually for Company A. Company A's Board thinks it will be less costly to outsource. The Board believes the internal cost is $300 per unit while Company B's cost is $280 all-in. So, outsourcing has to be less costly to Company A per the Board. Production Capacity Units Excess Opacity Unts 25.00% 1,000,000 250.000 Selling Price full capacity Selling Price excess capacity Urut Price 400 350 Revenue 387.500,000 87 500,000 Direct Materials Direct Labour Variable Factory Overhead Deprecation Service allocations Units Excess Capacity 100 25,000,000 RO 20.000.000 CO 12.500,000 30 7.500,000 40 10.000.000 300 75,000,000 Full Casily 100,000,000 80,000 000 50,000,000 30,000,000 40.000.000 300.000.000 12 500,000 87 500 000 Oporting Profit Accounting Outside cost for the units 280 if the work is outsouroed Questions 1. Calculate the additional operating profit - accounting from outsourcing (i.e., stand-alone) 250,000 production units. 2. Calculate the return on sales currently and return on total sales if 250,000 units of production is outsourced. 3. Calculate the return on total sales if all excess production capacity is done internally. 4. Calculate the incremental per unit cost of outsourcing production compared to the internal per unit cost. 5. Justify whether you would make internally or outsource-buy production