Bose Inc. manufactures and sells sports equipment. Occasionally, it will buy in a product rather than produce it, if it is cheaper to do so. One of Bose's customers (the Irish Rugby Team) has requested a special order of 2,300 rugby balls. The management of Bose is currently deciding whether it should purchase the rugby balls from another company, at a price of $108,000, or produce the rugby balls itself. The following information relates to the costs involved in the production of the rugby balls in-house.

Raw Materials:					Note
Rubber			7,000 kgs		1
Poly-Cotton			4,750 kgs		1
Latex			3,000 kgs		1
Skilled Direct Labor			420 hours		2
Unskilled direct labor			180 hours		2
Variable Overheads					3
Fixed overheads					4

The following additional information is available in respect of the cost items listed above.

1. Bose uses three types of material in the production of its product and has sufficient stock on hand for the production of the 2,300 rugby balls. The following price data is available in respect of each of these raw materials:

			Rubber		Poly-Cotton		Latex
			$		$		$
Original purchase price			4.50		7.00		2.00
Current purchase price			6.50		9.00		3.00
Resale value			5.00		8.00		0.00

Bose always maintains a stock of Rubber as it is used in virtually all of its production processes. The stock on hand of Poly-cotton was purchased several years ago for another project which was cancelled at short notice. Management does not have any use for Poly-cotton other than in the production of these rugby balls but it could be sold. If the stock of Latex is not used in the production of the rugby balls it cannot be sold and will have to be disposed of at cost of $0.75 per kg.

2. Those employed in the Skilled Direct Labor category are paid a fixed weekly wage of $800 per 40 hour week and are currently under-utilized. It is expected that the hours of skilled labor required to produce the rugby balls will be resourced out of what is currently classified as idle time. The unskilled direct labor relates to hours worked by part-time employees who are employed as required and paid an hourly rate of $12 per hour.

3. Variable overheads cost is $11 per skilled direct labor hour.

4. If the company decides to produce the rugby balls it is estimated that incremental fixed overheads incurred directly in respect of producing them will amount to $10,200.

(a) Recommend whether Bose should produce the rugby balls internally or purchase them from another company based on cost.

(b) Suggest three qualitative factors which Bose should consider before arriving at a decision on whether to make or buy the rugby balls.