Question

we discuss differential analysis; choosing one course of action over another. Should we outsource (make or buy) our parts, sell or lease an asset that is no longer of use to the company, discontinue a segment of business, or retire an asset.

Identify decisions from your personal experiences that fit under one of the differential analysis categories. In order to earn the full points, please first identify the category, then describe in detail the costs (or revenues depending on your analysis) associated with your analysis and what decision you made based off of the nominal data and perhaps a sensitivity analysis. For full points, you must include cost information relating to your final decision.

Answer 1

SOLUTION :- MAKE OR BUY DECISION

when a company or a organisation decides to outsource their production , rather than making it own , the main aim behind this situation is to get the product at the lower prices and with the same quality or virtually same quality.

you decides to certain analysis and the most significant one is to review our own costs and remain our focus on relevant costs.

second yet most crucial point should be considered is to get the outsourced product at the right time and the right place

if you produce the product at your own house following costs shall be taken into consideration:-

variable costs	fixed costs
direct material	salary ,rent, benefits to employees
direct labour	other fixed overheads
variable overheads
shipping and handling charges
sales commissions

.If you outsource your production following costs shall be taken into consideration.

variable costs	fixed costs
shipping and handling	other fixed overheads
sales commissions
purchase price of the supply

* we can see that material , labour .variable factory overheads shall be eliminated

salary of staff also get eliminated because we dont need longer the employees .

but to make the final decision regarding the make or buy proposal we need to consider the relevant costs which would be incurred rather than irrelevant costs that has already been incurred.

if the production is stopped you can do one thing to save the fixed costs associated with the premisesi.e to lease the building