Make or Buy Decision in Accounting

The video tutorial discusses the make or buy decision, which involves choosing between producing a product in-house or outsourcing it to a third party. The decision should be based on comparing the cost of purchasing the item to the incremental cost of making it. Key considerations include avoidable costs, opportunity costs, and qualitative factors such as supplier reliability and quality control. An example is provided where a company evaluates whether to make or buy table legs, considering both cost and qualitative factors. The analysis concludes that making the legs in-house is more cost-effective.

How does the reliability of suppliers impact the make or buy decision?

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In the example provided, what was the total cost of making the legs for the tables?

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