Question 2 (Make or Buy & Outsourcing) Pixie Pharmaceuticals is a research-based company which manufactures a wide variety of drugs for use in hospitals. The purchasing manager has recently been approached by a new manufacturer based in a newly industrialised country who have offered to produce three of the drugs at their factory. The following cost and price information has been provided Drug Production (units) Fairvoxide SpriteoliteGoblinex 80,000 20,000 40,000 Direct material cost per unit Direct labour cost per unit Direct expense cost per unit Fixed cost per unit Selling price per unit Imported price 0.80 1.60 0.40 0.80 4.00 2.75 1.00 1.80 0.60 1.00 5.00 4.20 0.40 0.80 0.20 0.40 2.00 2.00 Required a) Calculate the profit figure the company will make by producing all the drugs itself b) Recommend to the management whether any drugs should be purchased on the basis of cost only c) How will your recommendation in (b) above affect the profit and by how much? d) Explain the other factors that the management should consider before making a final decision. e) Discuss the factors that have led to a growth in the use of outsourcing