Page 12 - PowerPoint Presentation
P. 12
DECISION MAKING
Make / Buy Decision - Example
Cost to Make:
Material R30 000
Labour R80 000
Variable overhead R60 000
Depreciation (non cash – not relevant) R0
Allocated general overhead (not avoidable – not relevant) R0 .
R170 000
Cost to Buy:
R20 x 10 000 = R200 000
Difference in favour of making R30 000 (R200 000 – R170 000).
Therefore make the component.
Discussion of qualitative factors:
• Not a memory dump. The factors you list must be relevant to the specific
question
12
