Engineering Economy

CHAPTER 11

Make or Buy Decision

11.1 INTRODUCTION

Every business organization engaged in the manufacturing of tangible products face problems in deciding whether it is more advantageous to make a particular item in-house, or to buy it from a supplier. The choice involves both qualitative such as quality control and quantitative such as the relative cost factors. In order to decide either to make or buy the product, a company generally analyses the capacity of its facilities and the cost at which the product can be bought. Subsequently, the option that involves the least cost is selected by the company. Buying option appears to be feasible and beneficial for a company which manufactures low volume of product. In situations, where the total cost ...