PL Ltd makes office chairs and there are two processes involved: manufacturing and packaging. The following production information is also available.

	Manufacturing	Packaging
Capacity (yearly)	80,000 units	68,000 units
Actual production (yearly) 68,000 units	68,000 units	68,000 units
Fixed operating costs	$3,400,000	$1,360,000
Fixed operating costs (per unit)	$50 per unit	$20 per unit

Each chair sells for $500 and has direct material costs of $240 (assume there are no other variable costs) which are incurred at the start of the manufacturing process. There is an active market for office chairs, so PL can sell whatever it can make.

Please treat the following requirements as independent from one another. Required:

1. PL is considering using some modern technology in the packaging process which will increase output every year by 2,000 units. The annual cost of such modern technology is $118,000. Should PL go ahead with the plan? Show all your calculations and explain.

2. The manager of the manufacturing division has put forward a plan (which entails an annual cost of $10,000) to increase the capacity beyond 80,000 units. Should PL accept the proposal? Show all your calculations and explain.

3. PL is considering if it could sell 10,000 chairs in addition to the current order. Incidentally, an outside contractor has approached PL and offered to undertake the packaging process for PL for 10,000 units at $80 per unit which is four times the cost of $20 per unit at present. Should the contractors offer be accepted? Show all your calculations and explain. Particularly, comment on whether certain cost information is relevant or irrelevant in determining the viability of the proposal.

4. Another external contractor offers to manufacture 7,000 units at $25 per unit, which is half the cost of $50 per unit incurred by PL at present. Should this offer be accepted? Show all your calculations and explain. Particularly, comment on whether certain cost information is relevant or irrelevant in determining the viability of the proposal.

5. PLs manufacturing division makes on average 1,100 defective units each year. What is the cost of the defective units produced to PL? Show all your calculations and explain.

6. PLs packaging division makes on average 1,100 defective units each year. What is the cost of the defective units produced to PL? Show all your calculations and explain.