Southwestern Company Needs 1,000 Motors in Its Manufacture of Automobiles

Essay

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:
$\begin{array}{lr}\text { Direct materials } & \$ 500 \\\text { Direct manufacturing labor } & 250 \\\text { Variable manufacturing overhead } & 200 \\\text { Fixed manufacturing overhead } & 350 \\\quad \text { Total } & \$ 1,300\end{array}$ 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?