Make or Buy Decisions Analysis Assignment

Added on - 25 Nov 2019

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RUNNING HEAD: MAKE OR BUY DECISIONSMAKE OR BUYPROBLEM ANALYSIS
1MAKE OR BUY DECISIONSIntroductionMake and buy decision is the one of the most crucial decisions a firm has to make in order tomeet the demands of the market. The managers of the company have to make a decision as towhether to manufacture some products in house or to purchase them from the outside parties.This decision about manufacturing or buying a product requires a significant amount ofinformation about the cost involved in the manufacturing and the purchasing of the product.Not only cost but the other relevant factors are also to be considered while taking buy andmake decisions. The cost of making and buying the materials is identified using differenttechniques of cost management. Following is the analysis of the both the options availablewith the Play Dough Company.Solution:(a)Cost Per Unit Under Traditional Method :Statement of Producing 760000 CanistersParticularsAmountDirect Materials3,00,000.00Direct Labour (Working Note 1)1,80,000.00Variable Overhead (Working Note 2)1,20,000.00Total Variable Cost6,00,000.00Fixed Cost5,40,000.00Total Product Cost11,40,000.00
2MAKE OR BUY DECISIONSStatement of Producing One CanisterParticularsAmountTotal Product Cost11,40,000.00Total No. Of Products7,60,000.00Cost per Product1.50
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