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Question - Western Styles Ltd currently design and manufacture their own range of denim jeans. The cost details for their latest range are as follows:
Direct Materials
$450,000
Direct Labour
$200,000
Variable Overhead
$150,000
Fixed Overhead
$250,000
Total Manufacturing Cost
$1,050,000
Quantity Produced
35,000 pairs of jeans
Cost per pair of jeans
$30
An external specialist manufacturer has offered to supply a similar range of jeans for $19.50 per unit.
Required -
[1] Should Western Styles Ltd make or buy their range of denim jeans? Show all calculations.
[2] Identify 3 other factors that should be taken into consideration when deciding to make or buy.
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