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Should the company make or buy

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Question: A company, with no idle capacity, can manufacture a component with variable costs of £5.00 per unit. To purchase the unit from an outside supplier the price would be £6.80 per unit. To manufacture the component would mean that production of the main product would be reduced. The main product has a variable cost of £80.00 per unit and a selling price of £100.00 per unit. Ten components can be made in the time that it takes to make one unit of the main product. Should the company make or buy?

Reference no: EM131626925

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