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Stretch Inc. manufactures the elastic band that becomes the waistline in a pair of yoga pants. The...

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Accounting

StretchInc. manufactures the elastic band that becomes the waistline in apair of yoga pants. The manufacturing costs for the elastic bandalone are presented below. Stretch Inc. receives an offer fromNamaste to supply the elastic band for $6 each. If Stretchpurchases the elastic band from Namaste, the elastic bandmanufacturing facility will remain idle. Prepare an analysis todetermine whether Stretch should purchase the elastic band fromNamaste. Then explain any non-financial factors that mightinfluence their decision.
DirectMaterials:                                                         $4
DirectLabor:                                                                   2
Variable ManufacturingOverhead:                      1
Variable SellingExpense:                                         1
Fixed ManufacturingOverhead:                           7
TotalCost:                                                                    $15
MakeBuy
Purchase Price:
DirectMaterials:                                                         
DirectLabor:                                                                    
Variable ManufacturingOverhead:                        
Variable SellingExpense:                                           
Fixed ManufacturingOverhead:                          
TotalCost:                                                                                           -                         -  
Explainany non-financial factors that might influence their decision.

Answer & Explanation Solved by verified expert
4.4 Ratings (638 Votes)

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
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