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Please help me with question an and b. Please show calculations. Dutsourcing (Make-or-Buy) Decision These cost predictions include $80,000 in fixed factory overhead averaged over
Please help me with question an and b. Please show calculations.
Dutsourcing (Make-or-Buy) Decision These cost predictions include $80,000 in fixed factory overhead averaged over 10,000 units. Mountain Air accepts this offer, it will be able to reduce the variable labor and variable overhead costs of the auto air purifier by 50 percent. 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 motor-assembly space for $25,000 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 outsourcing (if applicable)Step by Step Solution
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