Question
Product X takes 20 hours to process on Machine 99. It has a selling price of Rs. 100 and Marginal Cost of Rs. 60. Y
Product X takes 20 hours to process on Machine 99. It has a selling price of Rs. 100 and Marginal Cost of Rs. 60. Y (a component part used in production) could be made on Machine 99 in 3 hours for a Marginal Cost of Rs. 5. The suppliers price is Rs. 10.
Should one make or buy Y? Discuss in both situations (i) when Machine 99 is working at full capacity; and (ii) when there is idle capacity.
What are other non-cost considerations to be kept in mind in such cases?
Step by Step Solution
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There are 3 Steps involved in it
Step: 1
To determine whether to make or buy component Y we need to compare the costs associated with each option in both situations when Machine 99 is working ...
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Step: 2
Step: 3
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Intermediate Accounting
Authors: Elizabeth A. Gordon, Jana S. Raedy, Alexander J. Sannella
1st edition
978-0133251579, 133251578, 013216230X, 978-0134102313, 134102312, 978-0132162302
