Blowing Sand Company is trying to decide if it should make-or-buy a component used in the production and manufacturing of the Blast fan. The Blast fan is the companys top-selling model with sales of 30,000 units per year. This model has a dual fan as well as a thermostat component that causes the fan to cycle on and off depending on the room temperature. Blowing Sand has always manufactured the thermostat component but is considering buying the part from a supplier. It cost Blowing Sand $5 to make each thermostat ($2.50 variable and $2.50 fixed). Flurry Co. has offered to sell the component to Blowing sand for $4. Blowing Sands decision to purchase the part from Flurry would eliminate all variable costs by none of the fixed costs. Blowing Sand has no other possible uses for the area currently dedicated to the thermostat production.

• Should Blowing Sand continue to make the thermostat or purchase the part from Flurry Co?
  • Justify your answer.