For the final assembly of a product in manufacturing company, a certain component is required. The company has the option either to produce the component itself or purchase it from the market. The production department which can make the component is currently working to full capacity and earning a contribution of Rs.10 per hour on an order which will last for another ten months. Repeat orders are very likely. Variable cost of making the components Rs.42 and it takes one hour per unit. Market price of the component is Rs.45 per unit.

What advice will you give to the management of the company?

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