Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA PM Exams › Make or Buy decision making
- This topic has 3 replies, 2 voices, and was last updated 2 years ago by John Moffat.
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- October 28, 2021 at 11:12 am #639307
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?
October 28, 2021 at 3:10 pm #639318Your 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?
October 28, 2021 at 5:19 pm #639339Sorry 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?
October 29, 2021 at 7:32 am #639357Then you would buy from outside (provided that there are no other restrictions given in the question).
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