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Vision Berhad manufactures several components for CD player and assembles these parts as well for domestic market. One of the components produced by Vision Berhad which is incorporated into another product before being sold is component A7. Vision Berhad manufactures 30,000 units component A7 each year for use on its production line. At this level of activity, the cost per unit for component A7 is as follows: Direct materials RM3.60 Direct labor RM10.00 Variable manufacturing overhead RM2.40 Fixed manufacturing overhead RM9.00 Total cost per component RM25.00 However recently, Rowell, an outside supplier has offered to sell 30,000 units of component A7 each year to Vision Berhad for a price of RM21.00 per component If Vision Berhad accepts Rowell's offer, the facilities being used to manufacture component. A7 could now be rented to another company at an annual rental of RM80,000. However, Vision Berhad has determined that two- thirds of the fixed manufacturing overhead being applied to component A7 would continue even if component A7 were purchased from Rowell, the outside supplier. Required: a. Establish the relevant costs per unit for making the component A7 internally. b. Based on the relevant cost concept, advise Vision Berhad whether the above component A7 should be should be manufactured or purchased from Rowell. All computations should be shown and any aspects which may require further investigation should be clearly stated. c. The Production Director of Vision Berhad recently said: 'We must continue to manufacture the component as only one year ago we purchased some special grinding equipment to be used exclusively by this component. The equipment cost was RM100,000, and it cannot be resold or used elsewhere and if we cease production of this component we will have to write off the written down book value which is RM80,000 Draft a briefly reply to the Production Director commenting on his statement above

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