C) Decision Making 1) Mr. Jones is concerned that he has not been using the correct approach to making critical decisions for the company in the past. He asks your advice on the steps he should take to improve this process. 5 Marks 2) One of the products made by Mr. Jones' company is a vacuum cleaner. An outside supplier has offered to produce the motors for all the vacuum cleaners the company produces for $126 each. Motors are currently manufactured internally. Per unit costs relating to the manufacture of this part are as follows. Direct materials Direct Labor Variable Overhead $30 $42 $24 Annual Fixed Cost is $270,000. The company requires 6,000 motors annually. If the company chooses to purchase the part Fixed Cost will be reduced by 30%. Additionally, if the part is purchased from the outside supplier, Pullman Inc can rent out its facilities for $75,000 annually. Mr. Jones wants you to: a) Use incremental analysis, and advise him as to whether he should continue to make the part or purchase it from the outside supplier? 10 Mark Page 5 of 7