When a buying division elects to purchase from an outside supplier,
A)the impact on overall company profits is usually not considered in the decision.
B)only fixed costs should be included in the decision analysis.
C)the price from the outside supplier is likely to be more than the incremental cost to the supplying division.
D)overall company profits should be enhanced.

Question

Quizplus · Accepted Answer

Overall company profits should be enhanced when a buying division elects to purchase from an outside supplier because the outside supplier can often provide the product or service at a lower cost than the supplying division.

When a Buying Division Elects to Purchase from an Outside