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Ned Flanders Corporation makes 100,000 units per year of a plastic gasket for use in one of its products. Data concerning the unit production costs of one gasket follow:
Direct Materials: $0.15Direct Labor: $0.10Variable Mfg Overhead: $0.13Fixed Mfg Overhead: $0.24Total Manufacturing Cost per Unit: $0.62
Assume NFC has no alternative use for the facilities presently devoted to production of the gaskets. Problem 1: What are two considerations other than money that Flanders should think about before making the decision to make the component versus buying the component?
Problem 2: If the outside supplier offers to sell the gaskets to Flanders for $0.46 each, should NFC accept the offer to buy the gaskets or continue to make them? Fully support your answer using relevant cost analysis.
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