Question
a/ Southwestern Company needs 1,000 motors in its manufacture of boats. It can buy the motors from Asian Motors for $1,250 each. Southwestern Company plant
a/ Southwestern Company needs 1,000 motors in its manufacture of boats. It can buy the motors from Asian Motors for $1,250 each. Southwestern Company plant can manufacture the motors for the following costs per unit: Direct materials Direct manufacturing labor Variable manufacturing overhead Fixed manufacturing overhead Total $ 600 250 200 350 $1,400 If Southwestern Company buys the motors from Asian Motors, 70% of the fixed manufacturing overhead applied will not be avoided. Required: i. Should the company buy or manufacture the motors? (6 marks) ii. What additional factors should the company consider in deciding whether or not to buy or manufacture the motors
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