Structuring a Make$-$or$-$Buy Problem

each. Cost information on internal production includes the following:

Fixed overhead will continue whether the ingredient is produced internally or externally. No additional costs of purchasing will be incurred beyond the purchase price.

Required:

What are the alternatives for Fresh Foods?

Make the ingredient in house or buy it externally. $$

List the relevant cost$(s)$ of internal production and of external purchase.

All of the above grad$$

Which alternative is more cost effective?

Make the ingredient in$-$house $$

By how much?

$ $x$

Now assume that $20\%$ of the fixed overhead can be avoided if the ingredient is purchased externally. Which alternative is more cost effective?

By how much?

$$,x$