15.3 Sabine entered her second year of business. She makes product A, which takes 3 hours using a basic machine. The marginal (variable) cost and selling price are £50 and £62 respectively. Component B, which is used in the manufacturing process of product A, could be made on the same machine in 1 hour with a marginal cost of £10. The best price for product B that Sabine managed to get from an external supplier is £12.

Sabine has to decide on whether to make or buy component B. Note that the machine currently is working at full capacity. Explain whether she should make or buy the component.