ACCA · Question 25 · Make or Buy Decisions
Section B - Case 2: BioNutri
BioNutri manufactures two specialized nutritional supplements: Alpha and Beta. Both products require processing on a specialized mixing machine. The machine is available for a maximum of 1,200 hours per month.
Product details:
Alpha: Selling price $50, Variable cost $30, Machine hours per unit: 2 hours. Maximum demand: 400 units.
Beta: Selling price $70, Variable cost $40, Machine hours per unit: 4 hours. Maximum demand: 300 units.
Before finalizing the decision to outsource the production of Product Alpha to the external supplier, which TWO of the following non-financial factors should BioNutri consider?
Answer options:
The reliability of the supplier to deliver on time.
The supplier's quality control standards for nutritional supplements.
The fixed costs currently absorbed by Product Alpha.
The shadow price of the mixing machine.
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