Ask Question
8 February, 14:59

What would be the monthly operating advantage (disadvantage) of purchasing the goods internally, assuming the external supplier increased its price to $50 per pound and the Production Division is able to utilize the facilities for other operations, resulting in a monthly cash-operating savings of $30 per pound

+2
Answers (1)
  1. 8 February, 17:02
    0
    The monthly operating advantage of purchasing internally is $20

    Explanation:

    Judging from an opportunity perspective, the company pays $50 when he purchases externally and as a result saves $30, in essence the company incurs $20 ($50-$30) more when it purchases externally.

    No doubt that if the situation reverses itself, the company gains $20 if produces and sells internally as against purchasing from external party.

    From the foregoing, it is obvious that the monthly operating advantage of purchasing goods internally is a cash saving of $20 per item

    Hence, buying internally is more desirable and preferred option
Know the Answer?
Not Sure About the Answer?
Find an answer to your question ✅ “What would be the monthly operating advantage (disadvantage) of purchasing the goods internally, assuming the external supplier increased ...” in 📘 Business if you're in doubt about the correctness of the answers or there's no answer, then try to use the smart search and find answers to the similar questions.
Search for Other Answers