Chapter 12, Problem 9F15

To determine

Decision of Making or Buying:

When a company takes decision, whether to manufacture a component internally or buy from outside it is called make or buy decision. While taking the decision, the variable costs of manufacturing the product is compared with the purchase price of the product when bought from the outside supplier.

In relevant costing, the decision to make or buy a product component depends upon the analysis of costs. Avoidable fixed costs and opportunity costs are also considered in the analysis

The financial advantage or (Disadvantage) of buying 80,000 units of Alpha form supplier instead of making