The Modern Software Company, Bangalore, finds that while it costs Rs. 67.50 each to make a component of Pen-Drive, the same is available in the market at Rs. 57.50 each with the assurance of a continued supply. The break-down of cost is as follows:

Rs / Each

Materials

27.50

Labour

17.50

Other variable costs

5.00

Fixed cost

12.50

  1. Should you make or buy?
  2. What would be your decision if the supplier offered at Rs. 45.50 each?