A company produces a variety of products each having a number of component parts. Product B takes
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A company produces a variety of products each having a number of component parts. Product B takes 10 hours to process on a machine working to its full capacity. B has a selling price of Rs. 100 and a marginal cost of Rs. 50.
AA’ – a component part (used for product A), could be made on the same machine in 2 hours for a marginal cost of Rs. 15. The suppliers’ price is Rs. 20. Should one make or buy the component AA’? Assume that the machine hour is the limiting factor.
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