. Make or Buy Decision. Ling Automotive Systems developed a new windshield cleaning system for the original-equipment auto market. The system requires an electronic motor that the firm does not currently produce but is available from suppliers. The best bid is from Fiero Electronics, an Italian firm, at \(\$ 23\) per unit for any volume within the firm's relevant range.

Ling's production manager believes that the motor can be made in-house, although additional space and machinery would be required. The firm now leases, for \(\$ 80,000\) per year, space that could be used to make the new motors. However, another subsystem is now assembled in this space. Ling would have to lease additional space which rents for \(\$ 175,000\) per year in an adjacent building for the assembly process. It is suitable for assembly work but not for motors production. Additional equipment needed would rent for \(\$ 200,000\) per year.

The controller has developed the following unit costs based on the expected demand of 100,000 units per year:

Required:
Should Ling make or buy the motors? What assumptions are you making?

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Prime costs.. Rent for space Machinery rental $14.00 -80 2.00 Variable overhead 4.00 Allocated fixed overhead 6.00 Total costs $26.80