From The Caveman to CFO: An Age-Old Dilemma 📜§
Whether it’s primordial humans debating if they should wrestle a saber-toothed tiger or simply buy mammoth stakes from the cave next door, the ‘Make or Buy’ decision has always been a thing! Today, you, dear modern-day accounting wizard, face the perilous task of deciding whether to produce in-house or outsource – minus the flint tools and mammoth hazards!
Counting the Bean$ or Shard$ 🤖§
The archetypical ‘Make or Buy’ decision boils down to comparing the relevant costs. Here’s the juicy bit—relevant costs are the costs that will change depending on the decision you make (pun fully intended). That’s right; no more daydreaming about extraneous stuff like chewy labor contracts signed five eons ago.
Relevant Costs: The Juiciest Nuggets! 🥡§
- Direct Material Costs: What’s it going to cost you in raw materials?
- Direct Labor Costs: Your in-house workers earn their golden pennies, remember!
- Variable Overheads: Keep the lights and machines running!
Secret Ingredient: Opportunity Costs 🔍§
Raise your hand if you find yourself thinking,