Question 2 Part A Sample question with answer Bo Digital company has the capacity of producing 50,000 units annually. Budgeted operating results for 2020 are given below on the table Sales [40,000 @ $28} Variable costs: Manufacturing (40,000 at $4.60] Selling (40,000 at $0.95) Admin (40,000 at $1.20) Fixed Cost Manufacturing Selling & administrative $64,000 $ 16,000 Show all your workings A customer wants to buy 15,000 units at a price of $20 per unit. All fixed cost will decrease by 10% if the special order is accepted. Variable manufacturing costs would increase by 15% per unit for the special order only REQUIRED Determine whether the company should produce the special order or not Show all workings and use the format provided in review Part B BUY OR MAKE Question Buzz LDT management is making a decision of whether to make a part that is used in the making of a Product or to buy it from an outside supplier. Based on its financial report , it seems it costs the company $73.00 per unit to make the component. The cost is broken in the following manner $ Direct materials 50,000 Direct Labor 58,000 Variable Manufacturing Overhead 28,000 Fixed Manufacturing Overhead 10,000 Company uses 2000 components per year An supplier , John LTD offered to provide the part at $78.00. Some of the managers believed that they have to consider the proposal because the company may save on the cost = If the company buys the part from the supplier , it can save 10% of fixed manufacturing overhead per unit and the company can rent a part of the factory for $ 12,000 if production of that part is not produced REQUIRED Based upon relevant cost differences, should company make or buy the component . Show the calculation [ 40 marks ]