Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 19

Purchase price is $35 for a part that can be manufactured for $33; the $33 manufacturing costs include $5 per unit fixed cost. What is the savings to make rather than to buy?

Step 1 of 2

Make or buy decision: This is a strategy of deciding whether to manufacture a product internally or to buy the product from external source is known as make or buy decision.