QUESTION 2-MAKE VS BUY (15 marks) 2 National Motors (NM) manufactures cars and produce the themselves. The following manufacturing costs are incurred per the based on budgeted production of 80.000 tres per years 4 Per 5 Direct Materials $38.00 55 Direct Labour 30.00 Variable manufacturing overhead 16.00 8 Fixed manufacturing overhead 20.00 9 Total 5104.00 10 1. A supplier has approached NM to supply the tires for 595 per unit. 2 Discontinuing the production of the tires would result in layoff of some salaried employees which will create a reduction of 30% of the feed factory overhead. it has also been determined that some space freed up in the manufacturing area could be rented out to outsiders for storage at an annual fee of $40,000. Required: 2. Qualitative factors aside, at the 80,000 budgeted level of production, what should NM do-make the part itself or buy it from the foreign suppliar? What is the impact on the company's net income? (Show your detailed analysis and decision). (8 marks) 32 33 2. At what level of production volume would NM be indifferent between making the part itself or buying it from the foreign supplier (4 marks 36 37 38 39 40 41 3. Over what range of production would the company be better off buying the part itself? Explain your decision. (1 Mark) 43 45 16 74. List two qualitative factors to be considered in a make/buy decision and comment. (2 marks)