Question: Question 6 (7 marks) Superior Designs Jerseys (SDJ) has the capacity to produce 20,000 jerseys per year and is currently selling all 20,000 for $200
Question 6 (7 marks) Superior Designs Jerseys (SDJ) has the capacity to produce 20,000 jerseys per year and is currently selling all 20,000 for $200 each. JLo Enterprises has approached SDJ to buy 500 jerseys for $160 each. The company's normal variable cost is $135 per jersey, including $45 per unit in direct labour per jersey. SDI can produce the special order on an overtime shift, which means that direct labour would be paid overtime at 150% of the normal pay rate per unit. The special order will not affect the annual fixed costs, and a special machine needs to be purchased at $600 for this order. The contract will not disrupt any of SDJ's other operations. Required: 1. What quantitative factors should SDJ consider in evaluating whether to accept or reject the special order? ( 1.5 marks) ii. Should SDJ accept the special order? Explain. (2.5 marks) iii. In a make vs buy decision, what qualitative factors may arise that may influence the final decision? ( 3 rrarks) SHOW YOUR WORKINGS
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