Mountain Air Limited manufactures a line of room air purifiers. Management is currently evaluating the possibile production of an air purier for automobiles Based on an annual volume of the predicted cost per unit of an auto air purifier follows. Direct materials $8.00 Direct labor 1.50 Factory overhead 9.00 Total $18.50 These cost predictions include 560,000 in facility level fixed factory overhead averaged over 10,000 units Soiding One of the component parts of the auto air purifier is a battery operated electric motor. Although the company does not currently manufacture these motors, the preceding cost predictions are based on the assumption that it will assemble such a motor, Mini Motor Company has offered to supply an assembled battery operated motor at a cost of $5.50 per unit with a minimum annual order of 5.000 units. If Mountain Air accepts this offer, it will be able to reduce the variable labor and variable overhead costs of the auto ar purifier by 5 percent. The electric motors.components will cost $2.00/ Mountain Ar assembles the motors. (a) Determine whether Mountain Air should continue to make the electric motor or outsource it from Mini Motor Company Calculate the net advantage disadvantage of outsourcing the electric motors from Mini Motor Company Use a negative sign with your answer to indicate a net disadvantage of applicable) 50 X by it could otherwise rent the motor assembly space for $24,000 per year, should it make or outsource this component Calculate the net advantage disadvantage of outsourcing the motors, assuming the space could be rented Use a negative sign with your answer to indicate a net disadvantage of applicable) (a) Determine whether Mountain Air should continue to make the electric motor or outsource it from Mini Motor Company Calculate the net advantage (disadvantage) of outsourcing the electric motors from Mini Motor Company. Use a negative sign with your answer to indicate a net disadvantage (if applicable) $0 (b) if it could otherwise rent the motor assembly space for $24,000 per year, should it make or outsource this component? Calculate the net advantage (disadvantage) of outsourcing the motors, assuming the space could be rented. Use a negative sign with your answer to indicate a net disadvantage (if applicable) $0 X (c) Management should consider which of the following nonquantitative factors in deciding whether to make or buy the motors. The quality of their own and the supplier's motors. The dependability of the supplier. Whether Mini Motor has a track record of meeting its commitments Whether they can depend on Mini Motor to supply motors for a number of years or whether it is attempting to use some temporarily de capacity All of these Mark 1.00 out of 1.00
