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This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License
Article
Outsourcing Service Departments
Author(s)
Massoud Malek
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DOI:10.17265/1548-6583/2015.08.005
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ABSTRACT
In a manufacturing company, certain departments can be characterized as production departments and others as service departments. This paper expands and simplifies the results by the author and his co-author (Lowenthal & Malek, 2005; 2013), by explaining in a simple way how to obtain the fair-price per unit to pay to external suppliers that replace service departments. The paper also proves that replacing several service departments at once produces exactly the same fair-price per unit if they were replaced sequentially.
KEYWORDS
service departments, production department, outsourcing, external supplier, traceable cost, full cost, fair value cost per unit, indifference point
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