The Cool-Qwik Refrigerator Company purchases and installs defrost clocks in its products. The clocks cost $150 per case, and each case contains 12 clocks. The supplier recently gave advance notice that, effective in 30 days, the price will rise by 50 percent. The company has idle equipment that, with only a few minor changes could be used to produce similar defrost clocks.

Cost estimates have been prepared under the assumption that the company could make the product itself. Direct materials would cost $110 per 12 clocks. Direct labor required would be 10 minutes per clock at a labor rate of $20.00 per hour. Variable manufacturing overhead would be $4.00 per clock. Fixed manufacturing overhead, which would be incurred under either decision alternative, would be $30,000 a year for depreciation and $250,000 a year for other costs. Production and usage are estimated at 80,000 clocks a year. (Assume that any idle equipment cannot be used for any other purpose.)

Prepare an analysis that indicates whether the defrost clocks should be made within the company or purchased from the outside supplier. In your analysis be sure to include the unit cost to make one clock and to buy one clock. Also discuss any relevant qualitative factors.