Please help me with my question a, thank you

Please help me with my question a, thank you

Pedals Ltd produces bicycles. This year's expected production is 10,000 units. Currently, Pedals makes the chains for its bicycles. Pedals' management accountant reports the following costs for making the 10,000 bicycle chains: Costs for 10,000 units Cost per unit Direct materials Direct manufacturing labour Variable manufacturing overhead (power and utilities) Inspection, setup, materials handling Machine rent Allocated fixed costs of plant administration, taxes and insurance Total costs $4.00 $2.00 $1.50 $40,000 20,000 15,000 2,000 3,000 30 000 $110.000 Inspection, setup, and materials-handling costs vary with the number of batches in which the chains are produced. Pedals produces chains in batch sizes of 1,000 units. Pedals will produce the 10,000 units in 10 batches. Pedals have received an offer from Chains Ltd, an outside vendor, to supply chains at $8.20 per chain. If Pedals buys all of its chains from Chains Ltd, it does not need to pay rent on the machine it currently uses to make them (see above). Required a b On financial considerations alone, advise Pedals Ltd as to whether or not it should accept the offer from Chains Ltd if: Pedals purchases the chains and the production area previously used to make the chains remains idle. [6 marks] ii Pedals purchases the chains and uses the production area previously used to make the chains to upgrade the bicycles by adding mud flaps and reflectors. As a consequence, the selling price of bicycles will be raised by $20. The variable cost per unit of the upgrade be $18, and additional tooling costs of $16,000 would be incurred. [6 marks] Suggest qualitative factors that may affect the advice you have given above. [3 marks]