=1.7. The Water Sports Company soon will be producing and marketing a new model line of motor boats. The production manager, Michael Jensen, now is facing a make-or-buy decision regarding the outboard motor to be installed on each of these boats. Based on the total cost involved, should the motors be produced internally or purchased from a vendor? Producing them internally would require an investment of $1 million in new facilities as well as a production cost of $1,600 for each motor produced. If purchased from a vendor instead, the price would be

$2,000 per motor.

Michael has obtained a preliminary forecast from the company’s marketing division that 3,000 boats in this model line will be sold.