Question: In making a make or buy decision, the relevant decision rule Is do not buy If: costs are: the variable manufacturing costs that will be
In making a make or buy decision, the relevant decision rule Is do not buy If: costs are: the variable manufacturing costs that will be saved Is higher than the purchase price; the purchase price of the units to be purchased Is lower than the variable price opportunity costs foregone all of the above. XYZ processes a product through three stages ( A,B, C) before it sells It. However, It is recently considering selling the product at point B because of difficult marketing conditions. The products costs through B Is as follows: Variable costs are dollar 12, fixed Costs are dollar 8 per unit. At point B, the product sells at dollar 25 per unit. If it Is processed further to point C before the final sell, the total manufacturing costs will become dollar 25 but will sell in the market for dollar 35, per unit. What one sensible decision should XYZ take ? Process the product further and sell it at point C. Continue to produce and store the products at Point B until the economic condition changes Do a market research to see what the market price will be in the next year and then decide Do a report of the situation and leave it for top management to decide. No correct answer is given
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