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Explain qualitative factors in short term decision making

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Reference no: EM132573815

Clothes Solutions Inc. manufactures vinyl-clad wire storage systems. Each system requires fasteners to attach it to structural members of closets. Historically, the company has produced the fasteners. The costs to produce a fastener

Direct material..................................................................................$ 0.06

Direct labor .......................................................................................0.03

Variable factory overhead ................................................................ 0.03

Total variable cost per unit ............................................................$ 0.12

Fixed factory overhead

Depreciation on equipment .......................................................... $160,000

Rent of Premises (indirect cost)..................................................... $30,000

Two Supervisor salary(each supervisor's salary 50,000)........................... $100,000

Modern Fastener Systems has recently approached Clothes Solutions Inc. with an offer to supply all required fasteners at a price of $0.15 per unit. If clothes solutions Inc. accept this offer than they need only one supervisor and can use the idle space to make 100,000 units of another product which will generate a contribution of $12 per unit.Anticipated sales demand for the coming year will require 4,000,000 units of fasteners.

Required:

Question a. Advice Clothes solution Inc. shall they accept this offer.

Question b. Identify and briefly explain qualitative factors in short term decision making

Reference no: EM132573815

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