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Outsourcing ( Make - or - Buy ) Decision Direct materials $ 8 . 0 0 Direct labor , 1 . 5 0 Factory overhead
Outsourcing MakeorBuy Decision
Direct materials $
Direct labor
Factory overhead
Total $
These cost predictions include $ in facilitylevel fixed factory overhead averaged over units. motor's components will cost $ if Mountain Air assembles the motors.
a Determine whether Mountain Air should continue to make the electric motor or outsource it from Mini Motor Company. Hint: Analyze the relevant costs of making the "motors," not the entire air purifier.
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 outsourcing if applicable
b If it could otherwise rent the motorassembly space for $ 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 outsourcing if applicable
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 idle capacity.
OAll of these.
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