Question $2$

Thunder Company is considering outsourcing a key component. A reliable supplier has quoted a price of

RM$755\mathrm{.}00$ per unit. The following costs of the component when manufactured in$-$house are expressed on a

per unit basis:

In addition, Thunder Company incurs fixed overhead at a total cost of RM $150,000.$ The company is currently

manufacturing in$-$house and selling $1500$ units of the component.

a$.$ What assumptions need to be made about the behaviour of overhead costs for Thunder in order to

analyse the outsourcing decision?

b$.$ Should Thunder Company consider outsourcing the component? Please show any relevant

calculations and justify your opinion.

C$.$ What other factors are relevant for this decision?