Xyz ltd needs 1000 motors in its manufacture of cars it can

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Reference no: EM13587076

XYZ Ltd needs 1,000 motors in its manufacture of cars. It can buy the cars from Fast Motors for $1,250 each. XYZ'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 XYZ buys the motors from Fast Motors, 70% of the fixed manufacturing overhead applied will not be avoided.

Required:

a. Should XYZ make or buy the motors? Show your calculations

b. What additional (qualitative) factors should XYZ consider in deciding whether or not to make or buy the motors?

Reference no: EM13587076

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