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1) If variable cost < Buy-in Price then we should make the products in-house until the limited resource is fully utilized.
2) If variable cost > Buy-in Price then we should buy the products from outside because it is cheaper to buy from outside rather than making ourselves.
But how do we deal with questions when variable cost > Buy-in Price?
3) In chapter 9 (example 3) we have variable cost < Buy-in Price such as in the case (1) then we should buy the products from outside because it is cheaper to buy rather than making ourselves.
Is that right SIR?
Your first two statements are correct.
However I do not understand what you are saying afterwards.
You have written in (1) what we do if the variable cost is less than the buy-in price.
Have you watched the lectures working through this example?
Sorry for my mistake!!!
What I meant to say was if we have variable cost > Buy-in Price such as in the case (2) then we should buy the products from outside because it is cheaper to buy rather than making ourselves.
In your example 3 we can see that variable cost is less than buy-in price from outside so we prefer to make products in-house because it is cheaper.
BUT what if the variable cost of making the product is greater than buy-in from outside? That’s what I was asking?
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