David is trying to decide if it makes sense to outsource the purchasing function. He has a chain of 12 restaurants and employs two buyers at an annual fixed cost of $85,000. David estimates that the variable cost of each purchase order placed is $15. An outsourced company will perform the purchasing function for a fixed annual fee of $100,000 plus $5 for each purchase order placed. Last year, David placed 1400 purchase orders. Required:
a. What was the in-house purchasing cost last year?
b. What would the cost be if outsourced?
c. If David estimates it will place 1600 purchase orders next year, should he outsourced?

Answer and Explanation:

The computation is shown below;

a) The In-house purchasing cost last year is

= Fixed costs + Variable costs

 =$85,000 + Total number of purchase orders × cost per order

 = $85,000 + 1400 × 15

= $106,000

b)

The outsourcing cost is

Outsourcing cost = Fixed costs +Variable costs

 = $100,000 + Total number of purchase orders × cost per order

= $100,000 + 1400 × 5

 = $107,000

c) Total number of purchase orders = 1600

In-house purchasing cost = 85,000 + 1600 × $15 = $109000

Outsourcing cost = $100,000 + 1600 × $5 = $108000

Yes, David should outsource as the outsourcing cost is less than the in-house purchasing cost.

c

explanation:

c because the item on a bank statement is also referred to as an account statement. in addition, it provides the beginning balance, ending balance, statement date, transaction date for each transaction, payee, customer name and address, statement period, the account holder's account number, and the bank's customer service number

d, rjskdndjsndbdnsjdbxbc