Question

In a recent advertisement, Patagonia touted the advantages of a wet suit that it makes and sells. The company stated the following: "It takes 6 hours and 45 minutes to make one Patagonia wet suit. That’s a long time, but building something to perform perfectly for years of hard use can’t be rushed. We make our wet suits by hand with limestone-based neoprene. We line them with either recycled polyester Regulator grid fleece, or a Regulator fleece/merino wool blend in our warmer suits. We’re meticulous – we insist that every detail be totally dialed so that your wet suit seems to disappear when you paddle out. But there’s more to quality than performance. A comfortable, well-built suit means you don’t have to buy a new one anytime soon, and we won’t have to make another one – which means using fewer resources that the environment can’t readily replace." Describe how Patagonia should compute the cost of making a wet suit.

Answer 1

Patagonia should compute the cost of making a wet suit by taking all direct and indirect cost associate with it.

Direct Cost

1. Material cost = recycled polyester Regulator grid fleece, or a Regulator fleece/merino wool blend

Quanitity of Material Multiply by the price of material

2. Material cost = limestone-based neoprene

Quanitity of Material Multiply by the price of material

3. Labour Cost = It takes 6 hours and 45 minutes to make one Patagonia wet suit

Labour rate multiply by 6 hours and 45 minutes

In-Direct Cost

4. Quality Control Cost

The sum of above mention cost will be cost of making wet suit.