make or buy: savings per unit — OpenTuition Forums

Aabhirami3y ago

hey! While doing make or buy decision questions, we do savings per unit first, right? But what if a product’s purchase price from outside is cheaper than in-house? Do we calculate savings per unit and the following calculations for that product?

John MoffatTutor3y ago#1

You do whatever is the cheapest for the company!

Aabhirami3y ago#2

I mean, say the purchase price from an outside supplier is $55 per unit and the total cost when made in-house is $56 per unit, so it is obviously cheaper to buy from the supplier, so do we calculate saving per unit for this product or we ignore it?

John MoffatTutor3y ago#3

If those were the figures (which would be very surprising in an exam question) and there were no other factors mentioned then you would certainly purchase externally. There would be no need to calculate the saving unless it was required as part of the question.

Aabhirami3y ago#4

THANKS ALOT!!!!

John MoffatTutor3y ago#5

You are welcome :-)

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