Ford Motor Company is evaluating whether to make a component in-house or purchase it from an external supplier. The following information is provided:
•In-house production cost: $40 per unit (direct materials $15, direct labor $12, variable overhead $10, fixed overhead $3)
•Purchase price from supplier: $38 per unit
Required:
1.Calculate the total relevant costs for making and buying the component.
2.Determine the decision based on cost considerations.
3.Discuss non-financial factors that Ford should consider in the make-or-buy decision.