Xyz ltd needs 1000 motors in its manufacture of cars it can, Ask an Expert

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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?

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M9964653

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