Stretch Inc
Subject:AccountingPrice:2.86 Bought3
Stretch Inc. manufactures the elastic band that becomes the waistline in a pair of yoga pants. The manufacturing costs for the elastic band alone are presented below. Stretch Inc. receives an offer from Namaste to supply the elastic band for $10 each. If Stretch purchases the elastic band from Namaste, the elastic band manufacturing facility will remain idle. 1) an analysis to determine whether Stretch should purchase the elastic band from Namaste. 2) Then explain any non-financial factors that might influence their decision.
Direct Materials: $3
Direct Labor: 2
Variable Manufacturing Overhead: 3
Variable Selling Expense: 1
Fixed Manufacturing Overhead: 8
Total Cost: $17
Analysis
Make Buy
- -
Purchase Price:
Direct Materials:
Direct Labor:
Variable Manufacturing Overhead:
Variable Selling Expense:
Fixed Manufacturing Overhead:
Total Cost:
Should the company make or buy the elastic band?
Explain any non-financial factors that might influence the decision in this case.
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Computation of Cost of making and buy:
(Note: Fixed cost is not considered because its irrelevant Cost)
The cost Buy is higher as Compared to Cost to make:
Requirement 2:
Below are the non financial factors need to considered:
- The quality of the Product we can Purchase.
- payment Terms
- Adequate quantity available at the time of supply
- Market reputation of Seller.
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