Qualitative factors should everyday products consider

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Reference no: EM131216814

Everyday Products Company has recently created a demand for 10000 motors to be used in manufacturing vehicles. It has two options: 1. All 10000 motors could be purchased from Janan Motor Company for $12500 each. Everyday Products plant can be used to produce all 10000 motors at a per unit cost of 13000 per unit, as detailed below:

Direct materials $ 5000

Direct manufacturing labor 2500

Variable manufacturing overhead 2000

Fixed manufacturing overhead 3500

Total $13000

As a result of buying the motors from Janan Motor Company, Everyday Products will continue to incur 70% of the fixed manufacturing overhead applied costs.

Required:

a. You are asked to decide for Everyday Products whether it should buy the motors from Janan Motor Company or continue to make them on their own? Provide all your working/calculations.

b. In making the decision in ‘a’ above, what other qualitative factors (any four) should Everyday Products consider?

Reference no: EM131216814

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