Author Question: Fairhaven Company needs 1,000 motors in its manufacture of boats. It can buy the motors from Asian ... (Read 140 times)

CQXA · **on:** Mar 6, 2021

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

Direct materials

$ 600

Direct manufacturing labor

250

Variable manufacturing overhead

200

Fixed manufacturing overhead

350

Total

$1,400

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?

lcapri7 · **Reply #1 on:** Mar 6, 2021

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