Question
Brandy Garret is the president of Garret Inc., which makes jackets. She is trying to decide whether to make 3,000 Type III coats or purchase
Brandy Garret is the president of Garret Inc., which makes jackets. She is trying to decide whether to make 3,000 Type III coats or purchase them from a subcontractor to fill a rush special order that she just received. There are no marketing costs on the special order. Acceptance of the special order would not necessitate any premium pay for overtime work or additional fixed costs. Garret Inc. has supplied the following data:
Cost data for type III coats | |
sale price | $42 |
direct materials | 15 |
direct labor | 9 |
fixed manufacturing overhead | 3 |
variable manufacturing overhead | 6 |
variable marketing costs | 3 |
fixed administrative costs | 1 |
fixed administrative overhead | 2 |
Required:
A. What are the potential strategic issues related to this decision?
B. In addition to the cost information presented above, what other data would benefit Brandy Garret as she makes her decision?
C. Discuss the options Brandy Garret is facing, incorporating the information from parts A and B.
D. Make a recommendation. Please address how the issues from parts A and B would affect your decision.
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