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Make or Outsource Decision

Drums/year

90000

Cost per drum


Make
Buy
Supplier Price
Direct material
Direct Labour (70%)
Variable Overheads
Supervision
Depreciation

18
10
4
1
1
2

Total cost
Difference

18
0

18

Total Cost
Make
Buy
1,620,000
931,500
378,000
94,500
67,500
135,000
1,606,500 1,620,000
13,500

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