Simco Blenders makes different kinds of electrical blenders, mixers, and grinders for various kitchen needs. These products are powered by small electric motors. Presently, Simco buys these motors from an outside vendor. However, Simco is considering setting up a facility to make these motors in house. The following table presents financial information for both of these options.

Required:
What should Simco Blendersdo?

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Option 1: Making motors inhuse Inital oulay Useful life Salvage value at the end of useful life Unit variable cost Annual fixed costs (excluding depreciatio Required rate of return Corporate tax rate Annual demand for motors After-sales customer support cost (per unit) Option 2: Buying motors from vendor $1,500,000 10 years $16 $200,000 12% 30% 250,000 SI Unit price After-sales customer support cost (per unit) S18 $2