Question
Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for ${BUY} each. Southwestern's plant can manufacture
Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for ${BUY} each. Southwestern's plant can manufacture the motors for the following costs per unit:
Direct materials ${DM}
Direct manufacturing labor 281
Variable manufacturing overhead 245
Fixed manufacturing overhead 355
Southwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead applied will not be avoided .calculate the dollar amount Jabari would save or loss i they make the motors.
Required:
a. Should the company make or buy the motors?
b. What additional factors should Southwestern consider in deciding whether or NOT to make or buy the motors?
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