The management of a company finds that while the cost of making a component part is Rs. 15, the same is available in the market at Rs. 13 with an assurance to continuous supply. The cost information for production is as follows:
Rs.
(i) Material
3.50
(ii) Direct labour
5.50
3.00
(iii) Other variable expenses
(iv) Fixed expenses
3.00
Total
15.00
Give a suggestion whether to make or buy this part. Give also your views in case the supplier reduces the price form Rs. 13 to Rs. 11.
