The situation
A factory needs 5,000 parts. Avoidable internal cost is ₹40 per part and a supplier charges ₹46. Outsourcing releases capacity for a confirmed ₹45,000 contribution.
Your task
Which option adds more operating contribution?
Reveal step-by-step solution
Set up the problem
Supplier premium = (₹46 − ₹40) × 5,000 = ₹30,000.
Work through the numbers
Subtract the premium from the alternative contribution: ₹45,000 − ₹30,000 = ₹15,000.
Interpret the result
Outsource on the stated economics if quality and delivery hold. With no alternative order, making saves ₹30,000.
What to remember
Include avoidable costs and the value of released capacity. Exclude overhead that stays either way.