Direct Materials	R8.70
Direct Labour	R4.50
Fixed Overhead	R5.10
Variable Overhead	R3.60
Total Unit Cost	R21.90

As with other decisions, the make-versus-buy decision involves both quantitative and qualitative analysis. The quantitative component requires cost analysis to determine which alternative is more cost-effective. This cost analysis can be performed by looking at the cost to buy the component versus the cost to produce the component, which allows us to make a decision based on an analysis of unavoidable costs. For example, the costs to produce will include direct materials, direct labour, variable overhead, and fixed overhead. If the business chooses to buy the component instead, the avoidable costs will go away, but unavoidable costs will remain and would need to be considered as part of the cost to buy the component. Sample Data Console SA manufactures various types of leak-proof personal drink carriers. Console's insulated mug container maintains the temperature of the liquid inside for 6 hours. Console has designed a new lid for the insulated mug carrier that allows for easier drinking and pouring. The cost to produce the new lid is R21.90. This includes fixed overheads. Question 1 1.1 Initially, the R17.50 presented by Westpack seems like a much better price than the R21.90 that it would cost Console to produce the lids. However, more information about the relevant costs is necessary to determine whether the offer by Westpack is the better offer. Briefly describe the difference between Fixed Costs and Variable Costs and provide at least 3 examples for each cost category. (15 marks) 1.2. In the make or buy decision in this case, should Console consider the fixed costs? Substantiate your answer. (10 marks)