Final answer:
The cost to produce includes direct materials, direct labor, variable overhead, allocated overhead, and production supervisor salary.
Step-by-step explanation:
When considering a buy vs make decision, the cost to produce includes several components. First, there are direct materials (DM), which are the materials directly used in the production process. This can include raw materials or components needed to create the product. Second, there are direct labor (DL) costs, which are the wages or salaries of the employees directly involved in the production process.
Next, there are variable overhead (VOH) costs, which are the indirect costs that vary with the level of production. This can include expenses such as utilities, maintenance, or supplies that are required for production. Additionally, there are allocated overhead (OH) costs, which are the indirect costs that cannot be directly traced to a specific product and are allocated based on a predetermined method. These can include expenses such as rent, insurance, or depreciation.
Lastly, there is the production supervisor salary, which is the cost of employing a supervisor to oversee the production process and manage the production team.