Page 403 - PM Integrated Workbook 2018-19

Answers

Example 6

The purchasing manager of Debenham plc is considering a make v buy
decision based on the following estimates:

If made in If buy in and
house re-badge
Variable production costs $10 $2

External purchase costs – $6
Ultimate selling price $15 $14

What is the best decision (make the product in-house, or buy-in and
rebadge?)

When comparing contribution figures, we conclude that the product should be
brought-in and re-badged:

If made in house If buy in and re-badge
Contribution $5 $6

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