[vdfb]

Hello I am having a little problem with one of my homework questions
I need to calculate whether to make or buy a product already being manufactured in the firm. You will find the information in the attachement.

I know that I only need to consider variable costs and relevant fixed cost for calculating how much it would cost me to make it.

However, what I do not really understand is that if all the manufacturing overhead and the general administrative overhead are applied at direct labour hours, it means that they should both be completely considered in the decision right?

I know usually fixed manufacturing overhead and administrative and general expenses are usually not relevant; but they are also never applied at direct labour hours

Because if I decide not to produce, I will not incur direct labour therefore the two overheads won't be incurred also...

Please let me know if I shoul count them or not...

I am not sure :/ Thanks and Regards

[KanikaB91]

Thank you for this post.It helped me.