A company is planning to introduce a new portable computer to its existing product line. Management must decide whether to make the computer case or buy it from an outside supplier. The lowest outside price is $90. If the case is produced internally, the company will have to purchase new equipment that will yield annual depreciation of $130,000. The company will also need to rent a new production facility at $200,000 a year. At 20,000 cases per year, a preliminary analysis of production costs shows the following:

Per case

Direct materials.......................................................... .......... $ 40.00

Direct labor............................................................................ 32.00

Variable overhead.................................................................. 10.00

Equipment depreciation......................................................... 6.50

Building rental ...................................................................... 10.00

Allocated fixed overhead....................................................... 7.50

Total cost............................................................................... $106.00

Required:

(1) Determine whether the company should make the cases or buy them from the outside supplier.

(2) What other factors, besides cost, should the company consider?