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L01 PROBLEM 21.2A Easyuse Tool Co. manufactures an electric motor that it uses in several of its products. Manage- Decision ment is considering whether to continue manufacturing the motors or to buy them from an outside Make or Buy hrough source. The following information is available: ecel 1. Th e company needs 12,000 motors per year. The motors can be purchased from an outside supplier at a cost of $21 per unit. 2. The unit cost of manufacturing the motors is $35, computed as follows: 120,000 Factory overhead: 90,000 114,000 Fixed Total manufacturing costs.. $420,000 $35 Cost per unit ($420,000 12,000 units) the manufacture of motors will eliminate all the raw materials and direct labor costs but will eliminate only 75 percent of the variable factory overhead costs 4. If the 3. Discontinuing motors are purchased from an outside source, machinery used in the production of ors will be sold at its book value. Accordingly, no gain or loss will be recognized. The sale mot Chapte 21 Incr-montal Analysis of th machinty wouid also eliminate $6,000 in fixed costs associated with depreciation a taxes, No other reductions in fixed factory overhead will result from discontinuing the produ tion of motors. instructions Prepare a schedule in the format illustrated in Exhibit 21-6 to determine the incremental cost or benefit of buying the motors from the outside supplier. Using this schedule, would you rec ommend that the company manufacture the motors or buy them from the outside source? Assume that if the motors are purchased from the outside source, the factory space previously used to produce motors can be used to manufacture an additional 4,000 power trimmers per year. Power trimmers have an estimated contribution margin of $8 per unit. The manufacture of the additional power trimmers would have no effect on fixed factory overhead. Would this new assumption change your recommendation as to whether to make or buy the motors? in support of your conclusion, prepare a schedule showing the incremental cost or benetit buying the motors from the outside source and using the factory space to produce power trimmers. a. b. additional