Make or buy decisions under limiting factors, Managerial Accounting

MAKE OR BUY DECISIONS UNDER LIMITING FACTORS

One reason for buying products/services from another organisation is the scarcity of resources, so that the company may be unable to make all its components. In such a case the company should combine internal resources with buying externally to increase profitability. In situations where a company must sub-contract work to make up short fall in its in-house capability, then its cost will be minimized where the marginal cost of buying is least for each unit of scarce resource saved by buying externally.

Posted Date: 12/5/2012 7:45:15 AM | Location : United States







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