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Purchase and Buy Decision
The project manager or the production manager of a project has to decide whether to buy or make a part, so that it is available at the right schedule to ensure continuity in manufacturing/work process, as all these activities are highly time bound. Any delays in schedules will cause a cascading effect on overall project resulting in cost overruns. There are no universal rules applicable across projects. It varies widely from project to project.
For a manufacturing project, the factors favouring in house manufacture are as follows:
The factors favouring buy out are as follows:
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General Components Ltd produces a component ‘X', the selling price of which is Rs 50. The unit cost structure based on the present level of production/sales of 100 000 units
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