11-12. Tesla Motors is considering an offer from Borg-Warner to purchase transmissions for $640 per unit. The Ford factory making these units is currently operating at 80% of capacity. The cost of manufacturing an instrument panel is as follows:

Direct materials $ 280

Direct labor 360

Variable factory overhead 20

Fixed factory overhead* 70

Total cost per unit $730

*Fixed factory overhead consists of 90% attributable (or traceable) fixed costs and 10% common fixed costs.

Should Ford accept the offer from Borg-Warner to purchase the transmissions for $640 each? Why or why not? Please show your computations.

Make Buy