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5 (20 marks) (A) Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for $1.250 each.
5 (20 marks) (A) Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for $1.250 each. Southwestern's plant can manufacture the motors for the following costs per unit: Direct materials $ 500 Direct manufacturing labor 250 Variable manufacturing overhead 200 Fixed manufacturing overhead 350 Total $1,300 If Southwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead applied will not be avoided. Required: 1. Should the company make or buy the motors? Show your calculations. (8 marks) 2. Discuss what additional factors should Southwestern consider in deciding whether or not to make or buy the motors? (7 marks) (B) Discuss the issues and complications that may arise when multinational corporations conduct performance measurement and comparisons among divisions located in different countries
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