Motor Products Corporation
The Electric Division of Motor Products Co.has developed a wind generator that requires a special "S" ball bearing.The Ball Bearing Division of Motor Products Co.has the capability to produce such a ball bearing.
Unfortunately,the Ball Bearing Division is operating at capacity and will need to reduce production of another existing product,the "T" bearing,by 1,000 units per month to provide the 600 "S" bearings needed each month by the Electric Division.The "T" bearing currently sells for $50 per unit.Variable costs incurred to produce the "T" bearing are $30 per unit; variable costs to produce the new "S" bearing would be $60 per unit.
The Electric Division has found an external supplier that would furnish the needed "S" bearings at $100 per unit.Assume that both the Electric Division and Ball Bearing Division are independent,autonomous investment centers.
Refer to Motor Products Co.What factors besides price would Electric Division want to consider in deciding where it will purchase the bearing?

Question

Quizplus · Accepted Answer

The Answer of Motor Products Corporation
The Electric Division of Motor Products Co.has developed a wind generator that requires a special "S" ball bearing.The Ball Bearing Division of Motor Products Co.has the capability to produce such a ball bearing.
Unfortunately,the Ball Bearing Division is operating at capacity and will need to reduce production of another existing product,the "T" bearing,by 1,000 units per month to provide the 600 "S" bearings needed each month by the Electric Division.The "T" bearing currently sells for $50 per unit.Variable costs incurred to produce the "T" bearing are $30 per unit; variable costs to produce the new "S" bearing would be $60 per unit.
The Electric Division has found an external supplier that would furnish the needed "S" bearings at $100 per unit.Assume that both the Electric Division and Ball Bearing Division are independent,autonomous investment centers.
Refer to Motor Products Co.What factors besides price would Electric Division want to consider in deciding where it will purchase the bearing?

Motor Products Corporation The Electric Division of Motor Products Co.has Developed a Wind