QUESTION $3(17$ marks$)$ Question a $(11$ marks$)$ R Ltd manufactures security system panels offering warranty with free repairs for one year. The company produces and sells $120,000$ units per year, with production being restricted by short labor supply. Each unit include two main components, the keypad and the screen. The company is considering outsourcing the production of keypads and$/$or the production of screens. A new supplier is offering the supply of keypads for $ $5$ per unit and the supply of screens for $ $3\mathrm{.}50$ per unit for two years. The current total costs per year of the production of keypads and screens are the following. Notes $1.$ Materials costs for keypads are expected to increase by $5\%$ in $6$ months and for screens by $4\%$ immediately. $2.$ Electricity costs include an apportionment of general factory overhead for electricity as well as the costs of electricity directly used to produce keypads and screens. The apportionment is calculated using $30\backslash \%$ of the direct labor cost for each component and must incurred irrespective of whether the components are manufactured in the factory or purchased from the supplier. $3.\backslash (60\backslash \%\backslash )$ of depreciation and insurance costs relate to an apportionment of the general factory depreciation and insurance costs and the remaining is specific to the manufacturing of keypads and screens. $4.$ Machine costs are semi$-$variable, the variable element relates to set$-$up costs based on number of batches made. Keypads 'machine has fixed costs $\backslash$$$7,000$ per year and screens' machine has fixed costs $\backslash$$$9,000$ per year. $5.$ Both components are made in batches of $1000$ units but must change immediately to batches of $500$ units. $6.$ Direct labor costs are variable and will not change during next year. Required i$.$ Advise R Ltd if it should continue to manufacture the keypads and the screens or it should purchase them from the new supplier assuming it continues to adopt the policy of limiting manufacture and sales to $100,000$ panels for next year. $(7$ marks$)$ ii$.$R Ltd takes $1\mathrm{.}5$ labor hour to produce a keypad and $1\mathrm{.}7$ labor hour to produce a screen. Labor hours are restricted to $100,000$ and labor is paid at $\backslash (\backslash$$ $3\mathrm{.}50\backslash )$ per hour. The company wants to increase its supply to $140,000$ panels.