Question

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 $6 each. If Stretch purchases the elastic band from Namaste, the elastic band manufacturing facility will remain idle. Prepare an analysis to determine whether Stretch should purchase the elastic band from Namaste. Then explain any non-financial factors that might influence their decision.
Direct Materials:                                                          $4
Direct Labor:                                                                    2
Variable Manufacturing Overhead:                       1
Variable Selling Expense:                                          1
Fixed Manufacturing Overhead:                            7
Total Cost:                                                                     $15
	Make	Buy
Purchase Price:
Direct Materials:
Direct Labor:
Variable Manufacturing Overhead:
Variable Selling Expense:
Fixed Manufacturing Overhead:
Total Cost:	-	-
Explain any non-financial factors that might influence their decision.

Answer 1

	Make	Buy
Purchase Price		$       6.00
Direct Materials:	$    4.00
Direct Labor:	$    2.00
Variable Manufacturing Overhead:	$    1.00
Variable Selling Expense:	$    1.00	$    1.00
Fixed Manufacturing Overhead:	$    7.00	$    7.00
Total Cost:	$   15.00	$   14.00

Since the Cost of buying is less , he can go ahead with the buying.

Below are the non financial factors need to be considered

• The quality of the Product we are purchasing.
• Adequate quantity is available with the supplier to supply
• Payment terms.
• Delivery on time and to the warehouse.
• Reputation of supplier in Market