5 National Motors (NM)manufactures cars and produceres themselves 3 The following manufacturing costs are incurred per the based on budeted production of 10,000 Dres per year Direct Materials 6 Direct Labour 538:00 7 Variable manufacturing overhead 30,00 8 16.00 Fixed manufacturing overhead 20.00 Total $104.00 10 11 A supplier has approached NM to supply the tires for $95 per unit. 12 3 Discontinuing the production of the tires would result in layoff of some salaried employees which will create a reduction of 30% of the found factory overhead. it has also been determined that some space freed up in the manufacturing area could be rented out to outsiders for storage at an annual fee of $40,000. Required: 1. Qualitative factors aside, at the 80,000 budgeted level of production, what should NM do-make the part itself or buy it from the foreign supplier? What is the impact on the company's net income? (Show your detailed analysis and decision). (8 marks) 24 2. At what level of production volume would NM be indifferent between making the parts for buying in from the foreign poliur? 16 mars 36 37 38 39 40 3. Over what range of production would the company be better off buying the part itself? Explain your decision. (1 Mark) 42 13 4 5 4. List two qualitative factors to be considered in a make/buy decision and comment. (2 marks)