Question
I am doing a cost accounting homework, and I wanted to knowif opportunity costs should be included in the make or buy decision. Specifically should
I am doing a cost accounting homework, and I wanted to knowif opportunity costs should be included in the make or buy decision. Specifically should I include the revenue that the company will earn if they decide to buy a product in the calculation. For example If the company makes the product, I have direct materials of $20000, and variable overhead of $30000. If they decide to buy the product, the cost will be $80000 and they will be able to rent the machine used to make the product for an annual rental price of 20000. If they make the products, is the cost supposed to be $20000 + $30000 + $20000 = $70000. Therefore, they will have to make the product because they will save $10000.
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