Company ABC produces 10 units of Part#123 each month for its productI-Phone Y. The unit cost to manufacture 1 unit of Part#123 is:

Direct materials $1000/each

Materials handling(20% of direct materialscost) 200/each

Direct labor 8,000/each

Manufacturing overhead(150% of directlabor) 12,000/each

Total manufacturing cost $21,200/each

Materials handling represents the direct variable costs of the Receiving Department that are applied to direct materials and purchased components on the basis of their cost. This is a separate charge in addition to manufacturing overhead.

Thecompany's manufacturing overhead budget is1/3 of variable and2/3 fixed.

CompanyXYZ, one of CompanyABC's vendors, has offered to supply the Part#123, at a unit price of$15,000.

Assume Company ABC is able to rent all idle capacity for$25,000 per month.

Should Company ABC make or purchase the 10 units? What is the effect on the operating income?

What qualitative factors managers should consider when making make-or-buy decisions. List at least three items.