Question: 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

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.

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