Spaeth Industries produces time machines. The company is vertically integrated in that it produces many components necessary to assemble the time machine, primarily, the flux capacitors. An outside vendor offers to sell flux capacitors to Spaeth Industries for $46 per unit. To address whether or not it should buy the capacitors from an outside vendor, Spaeth Industries has assembled the following information. It produces 18000 units per year.

	Per Unit	18,000 units per year
Direct Materials	12	$216,000
Direct Labor	8	$144,000
Variable Manufacturing Overhead	6	$108,000
Fixed Manufacturing Overhead, traceable*	12	$216,000
Fixed Manufacturing Overhead, allocated	9	$162,000
Total Cost	47	$846,000

* one fourth supervisor salaries, three-fourths depreciation on special equipment (no resale value)

a.) What is the financial advantage/disadvantage of buying the flux capacitors from the outside vendor and should Spaeth Industries make or buy the capacitors?

b.) Suppose that if Spaeth Industries chooses to outsource its flux capacitors, it could use the idle factory space to start making widgets which would give it a segment margin of $180,000 per year. Given this assumption, should Spaeth Industries make or buy the capacitors and what is the financial advantage/disadvantage of doing so?