06 Jan Product X takes 20 hours to process on Machine 99.
Product X takes 20 hours to process on Machine 99. It has a selling price of Rs. 100 and Marginal Cost of Rs. 60. Y (a component part used in production) could be made on Machine 99 in 3 hours for a Marginal Cost of Rs. 5. The supplier’s price is Rs. 10.Should one make or buy Y? Discuss in both situations (i) when Machine 99 is working at full capacity; and (ii) when there is idle capacity.What are other non-cost considerations to be kept in mind in such cases?
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