Matchless Computer Company has been purchasing carrying cases for its portable computers at a delivered cost of $55 per unit. The company, which is currently operating below full capacity, charges factory overhead to production at the rate of 40% of direct labour cost. The fully absorbed unit costs to product comparable carrying cases are expected to be as follows:

$

Direct materials 28

Direct labour 20 Factory overhead(40% of direct labour) 8

Total cost per unit 56

If Matchless Computer Company manufactures the carrying cases, fixed factory overhead costs will not increase and variable factory overhead costs associated with the cases are expected to be 15% of the direct labour costs. Required:

a) Provide a statement to determine whether the company should make or buy.

b) On the basis of the data presented (a), would it advisable to make the carrying cases or to continue buying them? Explain

c) Explain THREE (3) qualitative factors if company decide to buy from outsider.