Fairhaven Company Needs 1,000 Motors in Its Manufacture of Boats

question 168

Essay

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:

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?

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Definitions:

Apple Pie

A traditional dessert pie, originating from England, made with apple filling enclosed in a pastry crust, often accompanied by ice cream, whipped cream, or cheddar cheese.

Gain From Trade

The advantage or improvement in outcome that countries or individuals achieve by specializing in the production of goods they can produce most efficiently and trading them for others.

Mexican Workers

Denotes individuals from Mexico who are part of the labor force, either within Mexico or in other countries.

US Workers

Individuals employed within the United States, encompassing a wide range of occupations and industries.