Make or buy. (J. Watson) Mitchell Ltd. manufactures electronic components used in prod- ucing appliances. Data relating to the unit cost of manufacturing one of its components are provided below:

The unit fixed manufacturing overhead cost is based on a denominator volume of 100,000 units. Since the component is used internally, there are no associated selling costs.
Phillips Corporation has offered to supply the component at a price of $16.25 per unit.
Mitchell believes that if it purchases the component, it will save $62,000 a year in fixed manufacturing salaries. It has been assured that the quality of the purchased component is consistent with its own product.
Mitchell is planning to produce 100,000 units of the component for the upcoming year.
REQUIRED ;
Should Mitchell continue to manufacture the component or should it purchase from Phillips Corporation? What nonfinancial factors should be considered by Mitchell?LO1

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Direct material $8.00 Direct manufacturing labour $3.00 Variable manufacturing overhead $4.00 Fixed manufacturing overhead $2.50