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Factory

Unit 5 - Operations management

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Chart Increasing

Unit 1 - Introduction To Business Management

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Briefcase

Unit 2 - Human Resource Management

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Money Bag

Unit 3 - Finance & accounts

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Direct Hit

Unit 4 - Marketing

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Bar-Chart

Unit 6 - Assessment

💡 Big Idea: Should a business make a product/service or buy it from someone else? That&#39;s the million-dollar (or maybe just $200,000) question!

<ul>
	<li>Cost to Buy (CTB): What it costs a business to purchase a service or product.</li>
	<li>Cost to Make (CTM): What it costs a business to produce that same service or product themselves.</li>
</ul>

<ul>
	<li>
	CTB = P &times; Q 
	(Where P is price &amp; Q is quantity)
	</li>
	<li>
	CTM = FC + (VC &times; Q) 
	(FC = fixed costs; VC = variable costs)
	</li>
</ul>

Imagine you&#39;re the principal of a school (cool, right?) in South-East Asia. You need buses for your students. But wait, should you hire a bus service or start your own?

<ul>
	<li>
	Option A: Use School Run 
	They charge $10,000 per bus/year. 
	So, for 20 buses: CTB = 20 x $10,000 = $200,000
	</li>
	<li>
	Option B: DIY with Dodgy Dealers Inc 
	Cost of 20 buses = $100,000 
	Yearly variable costs/bus (fuel &amp; driver) = $10,000 
	So, for 20 buses: CTM = $100,000 + ($10,000 x 20) = $300,000
	</li>
</ul>

Result? $200,000 &lt; $300,000. CTB &lt; CTM 
Verdict: School Run seems cheaper! But...

<ul>
	<li>Reliability: How trustworthy is School Run? Are Dodgy Dealers Inc buses...well...dodgy?</li>
	<li>Employment: Do you really want to hire bus drivers?</li>
	<li>Legal Matters: What if a bus breaks down or there&#39;s an accident? Who&#39;s responsible?</li>
</ul>

<ul>
	<li>Deciding to make or buy isn&#39;t just about 💲. There&#39;s a whole list of other factors, some that money can&#39;t buy!</li>
	<li>Always weigh costs with other qualitative factors before making big decisions.</li>
</ul>

PS: Next time you see a bus, think about the school principal and their big decision. Business is everywhere! 😉🚌

&nbsp;

Happy Studying! 📚🌈

Unit 5 - Operations management

Buy Vs. Make Unlock The Secret Cost Formulas For Smart Business Decisions

Table of content

The basics

Math time! 🧮

Unlock the Full Content!

Unit 5 - Operations management

Buy Vs. Make Unlock The Secret Cost Formulas For Smart Business Decisions

Table of content

The basics

Math time! 🧮

Unlock the Full Content!