XYZ Company needs 1,000 motors in its manufacture of automobiles. It can buy the motors from ABC for $1,250 each. XYZ's plant can manufacture the motors for the following costs per unit:
- Direct materials $ 650
- Direct manufacturing labor 250
- Variable manufacturing overhead 200
- Fixed manufacturing overhead 350
- Total $1,450
If XYZ buys the motors from ABC, 75% of the fixed manufacturing overhead applied will not be avoided.
Required:Should the company make or buy the motors? Show calculations.