Self-test Using the information for Clothes & Co. in section 33.3.23, above, and the results of your calculations, you are now required to consider another option open to the company.

The company has now decided to specialise in shirts and ties. It has approached Dress Ltd for a quotation for the manufacture of pants. It has now received a price for this and has been assured of delivery times and quality.

Dress Ltd has quoted £11.20 for each pair of pants. This seems to give Clothes

& Co. a profit of £3.80 per pair.

You are required to examine this proposition and recommend to the management of Clothes & Co. whether they should specialise and buy in pants for resale.

Give all the necessary calculations to support your recommendations.