Nadal Ltd. makes tennis rackets and other tennis-related items. This years expected production of tennis rackets is 3,000 units. Cost data is as follows:

	Per Unit		3,000 Units
Product costs directly traceable to rackets:
Direct materials	$ 14.00		$ 42,000
Direct labour	9.00		27,000
Variable manufacturing overhead	2.00		6,000
Fixed manufacturing overhead			10,500
Common costs			15,500
			$ 101,000

The full cost of tennis rackets is $33.67 per unit.

Nadal Ltd. has received an offer from an outside supplier to supply any desired quantity of tennis rackets at a price of $27 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 rackets are bought.

2. The direct fixed manufacturing overhead is the amortization of the machine that ties the netting of the rackets. The machine cannot be sold for any salvage value.

3. No other costs would be affected.

Required

a) Prepare a relevant cost analysis to determine whether Nadal Ltd. would be better off making or buying the rackets at an expected output level of 3,000 units. (6 marks)

b) What is one other non-financial factor that Nadal Ltd. should consider if they decided to buy the rackets instead of making them? Consider the products reputation. (1 mark)