Problem - Make or Buy C2 Marginora Manufacturing produces a component essential for its main product. The management is considering whether to make the component in-house or to buy it from an external supplier. The following information is provided: Current Production Costs for In-House Manufacturing of 5,000 units Direct Materials $915,000 Direct labor 460,000 Manufacturing overhead 675,000 Total Manufacturing Cost $2,050,000 Marginora Manufacturing's annual manufacturing overhead budget is 30% variable and 70% fixed. Atlead Construction, one of MarginoraManufacturing's reliable vendors, has offered to supply the component at a unit price of $336. MarginoraManufacturing anticipates needing 5,000 units of the component each year. 1. If Marginora Manufacturing purchases the 5,000 units from Atlead Construction, the capacity Marginora Manufacturing used to manufacture these parts would be idle. Should Marginora Manufacturing make or buy the component? What is the cost difference per unit to buy the part?

2. Assume If Marginora Manufacturing stops producing the component in-house, it can use the freed capacity to produce another product, which would contribute $110,000 annually to the company's profits. If Marginora Manufacturing decides to purchase the 5,000 units from Atlead Construction, what would be the change to MarginoraManufacturing's cost? 3. Assume the rental opportunity does not exist. What is the maximum price Marginora Manufacturing would be willing to pay Atlead Construction if Marginora Manufacturing requires a $60,000 savings a year before buying from an outside vendor? 4. What are some qualititative issues that Marginora Manufacturing should considering when considering whether they should continue to make the component or buy from an outside supplier?