Make or buy
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ACE Corporations incurs a $9 per unit cost for Product A, which it currently manufactures and sells for $13.50 per unit. Instead of manufacturing and selling this product, ACE can purchase Product B for $5 per unit and sell it for $12 per unit. If it does so, unit sales would remain unchanged and $5 of the $9 per unit costs assigned to Product A would be eliminated. Should the company continue to manufacture Product A or purchase Product B for resale?
Explain each calculation and defend the choice made.
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The solution explains how to make the make or buy decision
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With Product A, the profit per unit is 13.50-9 = $4.50
With Product B, the cost is $5 and if ...
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