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Hi. Say for example that I need 200 units of X for a special order and I’ve been asked to calculate the relevant cost.
I have 300 units which cost $4/unit which I use for a purpose… but I have 100 units in my inventory that I do not need in future and so I can use it for buy order and so only need to buy 100 extra units.
Do I include the
-cost of the 100 units already in the inventory or
-do I buy the whole 200 units from outside or
-do I not include the cost of 100 units already in inventory (sunk cost) ?I do not know why you have called this post ‘Make of Buy decision’!
You include the cost of the 200 that need buying.
If the 100 in inventory have no other use, then the only cost that is relevant is the opportunity cost – the lost sale value if you would otherwise be selling them as scrap.
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