Sony Ear Buds

Sony is deciding whether to make its own earbuds or outsource production to Shenzhen Electronics. Sony produces $2$ million earbuds each period. Sony's full absorption cost per unit is $$8.$ Shenzhen is willing to provide earbuds for $$7$ each. Production costs are DM $=$ $$4\mathrm{.}00,DL=$$$0\mathrm{.}50,$VMOH$=$$$1\mathrm{.}50,$FMOH$=$$$2\mathrm{.}00.$ Current fixed costs are $$4,000,000$ and Sony could save $$500,000$ in fixed cost each period by outsourcing. Sony has no other use for freed production capacity.

Should Sony accept Shenzhen's offer and outsource ear bud production? Show related computations and qualitative reasoning.

What would be acceptable price that should agree to if considering purely quantitative factors? Show computations.

Assume Sony can lease freed capacity to another company for $$2\mathrm{.}5$ million per period. How does this change your opinion?