A manager is considering a made inhouse decision vs outsourcing decision based on the following estimates: Made
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A manager is considering a made inhouse decision vs outsourcing decision based on the following estimates:
Made inhouse | Outsourcing and Rebadge | |
Variable production costs | £10 | £2 |
External purchase costs | - | £6 |
Ultimate selling price | £15 | £14 |
Contribution | £5 | £6 |
You are required to assess the sensitivity of the decision to the external purchase price. Comparing contribution figures, the product should be outsourced and re-badged. Please conduct the sensitivity test as follow. If the external purchase costs increase by 10% and 20%, respectively, would your original decision be reversed? Exolain.
Related Book For
Management Accounting Information for Decision-Making and Strategy Execution
ISBN: 978-0137024971
6th Edition
Authors: Anthony A. Atkinson, Robert S. Kaplan, Ella Mae Matsumura, S. Mark Young
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