Hi there! Thank you for the opportunity to help you with your question!
The "make-or-buy" decision is when you have the opportunity between having the production of an item in house (that is, you make the item), or buying it from an external supplier (the buy part).
The main costs associated with this come from the cost of production (how much it would cost for you to buy the materials, machinery, labor and all the features required to make this product) versus the cost of purchase.
For example, if it costs me $10,000 to buy machinery, $5,000 in wages, $5,000 in materials to make 1000 units of a product, then my total cost of production is $20,000, or $200 per unit. If I can buy the product for $150 elsewhere, then it would be advantageous to buy, and not make.
Please let me know if you need any clarification. Always glad to help!
Aug 28th, 2015
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