BPP Kit No.

154 Make or Buy, Limiting factor

(a) keypads display screen

Variable cost
Material 80+(80*10 164000 118320
Direct labour 40000 60000
Machine set-up cost(working) 27500 30000
231500 208320
Attributable/Specific fixed cost
Heat and Power 64-20 44000 58000
Fixed machine set-up cost 4000 6000
Depreciation and insurance 84*40% 33600 38400
81600 102400
Cost of making in-house 313100 310720
Cost of buying in 4.1*80 328000 344000
Saving from making in-house 14900 33280

Should make keypads and display screens in-house.

(b) keypads display screen

Variable cost of making 2.89375 2.604
Buying-in price 4.1 4.3
Save from making ($/unit) 1.20625 1.696
labour hour/ unit 0.5 0.75
Save from making ($/ labour hour) 2.4125 2.261333
Ranking 1 2

hour
Available labour hours 100000
Ranking
Keypads 10000 50000
50000
Display screens 66666.67 50000
0

100000units of keypads and 66667 units of display screens should be made in-house. 33333 units of display screens should be
 display screen Working: Machine set-up cost
Keypads Display screen
116*102% Total current variable cost 22000 24000
Current no. of batches 160 160
Current variable cost per batch 137.5 150
New no. of batches 200 200
Total new variable cost 27500 30000
88-30

96*40%

4.3*80

display screen

display screens should be bought-in.