Buyer Organization Requested Make Recommendations Whether Make Buy Capital Machine Compone Q34216450

You as a buyer for your organization and has been requested tomake recommendations on whether to make or buy a capital machinecomponent. You have analyzed the performance history of the companyconcerning the purchase price, fixed and variable costs and haverealized that the purchase price and variable costs are in theorder of 2% and 1.8% respectively of the value of fixed costs.Below listed are the fixed costs and their related costcenters;

(a) At what volume will the company be indifferent betweenbuying and making a capital machine component?

(b) If you decided not to buy or make the capital component butinstead considered the option of leasing the entire capital machineon a monthly leasing cost of K 2000 with the price of the capitalmachine component remaining the same. In how many months will thebreak-even point be reached?

(c) What are opportunity costs and why are they relevant as asubject of analysis when consideration capital equipment purchasingoptions?