Mills and Vines just received a bid from a supplier for 6,000 motors per year used in the manufacture of electric lawn mowers. The supplier offered to sell the motors for $88 each Mills and Vines' estimated costs of producing the motor follow Direct materials $40 Direct labour 20 Variable overhead 20 Fixed overhead 64 Prior to making a decision, the company's CEO commissioned a special study to see whether any decreases were possible in fixed overhead costs. The company would avoid two setups, which would reduce total spending by $10,000 per setup. One inspector would be laid oft at a savings of $28,000. A person in materials handling could also be laid off at a savings of $20,000. Engineering work would be reduced by 500 hours at $15 per hour. Although the work would decrease by 500 hours the engineer assigned to the motor line also spends time on other products. Identify and discuss any qualitative factors that would affect the decision, including strategic implications B 1 VT, TIES 1 E TH O Words e Textbook and Media After reviewing the special study, the controller made the following remarks This study ignores the additional activity demands that purchasing the motor would cause. For example, although the part would no longer be inspected on the production floor. We will need to inspect the incoming parts in the receiving area. Will we actually save any inspection costs?' Discuss whether you agree with the controller. Identify and explain other costs that might increase if the part is outsourced, 1 x T; T L = E 99 | O Words