Oleksiak Ltd. manufactures swim goggles. While the company currently makes the straps for the goggles, they have recently been approached by an outside supplier that has offered to sell them the straps at a cost of $6.00/unit.

Management is trying to determine whether making the straps or buying them is more cost effective. They have provided the following production cost information for you to analyze:

	Per Unit	Total
Direct Materials	$3.50
Direct Labour	$3.00
Production supervisor	$4.00	$80,000
Depreciation	$1.00	$20,000
Rent	$0.25	$5,000

The production supervisor will be employed in the factory whether the company buys or makes the straps. The depreciation is incurred on the factory equipment and is based on obsolescence (rather than wear and tear). Rent is on the entire production factory. The company will keep the same size of factory, even if they decide to purchase the straps from a supplier. Required: a. What is the cost if the company makes the straps?

b. Should the company make the straps or purchase from an outside supplier? Why?