Should the company make or buy the motors

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Reference no: EM131251292

Southwestern Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from Jinx Motors for $1,250 each. Southwestern's plant can manufacture the motors for the following costs per unit:

Direct materials $ 500

Direct manufacturing labor 250

Variable manufacturing overhead 200

Fixed manufacturing overhead 350

Total $1,300

If Southwestern buys the motors from Jinx, 70% of the fixed manufacturing overhead applied will not be avoided.

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?

Reference no: EM131251292

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