Campbell Ltd. makes hockey pucks and other hockey-related items. This years expected production of hockey pucks is 5,000 units. Cost data is as follows:

	Per Unit		5,000 Units
Product costs directly traceable to pucks:
Direct materials	$ 2.00		$ 10,000
Direct labour	1.00		5,000
Variable manufacturing overhead	0.75		3,750
Fixed manufacturing overhead			4,000
Common costs			14,250
			$ 37,000

The full cost of hockey pucks is $7.40 per unit.

Campbell Ltd. has received an offer from an outside supplier to supply any desired quantity of pucks at a price of $4.50 per unit. The cost accounting department has provided the following information:

1. Costs of direct materials, direct labour, and variable overhead will be saved if the pucks are bought.

2. The direct fixed manufacturing overhead is the cost of leasing the machine that stamps out the pucks. If the pucks are bought, the machine will no longer be needed.

3. No other costs would be affected.

Required

a) Prepare a relevant cost analysis to determine whether Campbell Ltd. would be better off making or buying the pucks at an expected output level of 5,000 units. (6 marks)

b) What is one other non-financial factor that Campbell Ltd. should consider if they decided to buy the pucks instead of making them? Consider the impact on their people. (1 mark)