Should pco ltd produce or buy the component from supplier, Business Management

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Should pco ltd produce or buy the component from supplier

Problem

PCO Ltd is considering the alternatives of either purchasing a component from an outside supplier or producing the component itself. The estimated costs to the company of producing a component are as follows: Direct labour100Direct materials 300 Variable overheads 50 fixed overheads 200650. The outside supplier has quoted a price of £400 for supplying the component.

Question: Should PCO Ltd produce or buy the component from the supplier?

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