Make or Buy - Make or Buy When a manufacturer assembles...

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Make or Buy When a manufacturer assembles component parts in producing a finished product, management must decide whether to make or buy the components. For example, General Motors Corporation may either make or buy the batteries, tires, and radios used in its cars. Similarly, Hewlett- Packard Corporation may make or buy the electronic circuitry, cases, and printer heads for its printers. Boeing recently sold some of its commercial aircraft factories in an effort to cut production costs and focus instead on engineering and final assembly rather than manufacturing. The decision to make or buy components should be made on the basis of incremental analysis. To illustrate the analysis, assume that Baron Company incurs the following annual costs in producing 25,000 ignition switches for motor scooters. Illustration 23-4 Annual product cost data Or, instead of making its own switches, Baron Company might purchase the ignition switches from Ignition Inc. at a price of $8 per unit. The question again is, “What should management
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This note was uploaded on 11/08/2011 for the course ACCOUNTING ac 202 taught by Professor - during the Fall '11 term at Montgomery.

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Make or Buy - Make or Buy When a manufacturer assembles...

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