Numerical on Make or Buy decision

Q.  A component is being made with the help of a machine. 10,000 units are made at a cost of Rs 10 per unit (of which Rs 9 are variable). The same component can be bought from the market at Rs 9.50 per unit. However, the owner intends to rent the machine for Rs 6,000 following which he will buy components from market. If he does so, what will be the impact?
- Published on 04 Sep 15

a. Savings of Rs 1,000
b. Loss of Rs 1,000
c. No Change
d. None of the above

ANSWER: Savings of Rs 1,000

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