Cost to buy
Cost to buy = Price × Quantity
Cost to make
Cost to make = Fixed costs + (Average variable cost × Quantity)
Cost to buy vs. cost to make
If Cost to Buy (CTB) is greater than Cost to Make (CTM), then it is more financially desirable to ‘make’. If the cost of producing the product is lower than the supplier’s price, it makes more financial sense to make the product rather than...
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