=+8-42 KK Make versus buy, ethics (CMA, adapted) OBJECTIVE 2 Lynn Hart is a management accountant at Paibec Ltd. Paibec Ltd is under intense cost competition. Lynn has been asked to evaluate whether Paibec Ltd should continue to manufacture MTR-2000 or purchase it from Marley Ltd. Marley Ltd has submitted a bid to supply the 32000 MTR-2000 units that Paibec Ltd will need for 2014 at a price of $34.60 each. Paibec Ltd has capacity available to produce 32000 units.

From plant records and interviews with John Porter, the plant manager, Lynn gathered the following information regarding Paibec Ltd’s costs to manufacture 30000 units of MTR-2000 in 2013:

1 2

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7 8

9 10 A B Costs for 30 000 units in 2013 Direct materials Direct manufacturing labour Plant space rental Equipment leasing Other manufacturing overhead Total manufacturing costs

$390 000 240 000 168 000 72 000 450 000

$1 320 000 Additionally, Porter tells her: