Lakdinu Electronics Company: a teaching case on relevant costs in an outsourcing decision

Purpose – To increase students' knowledge of differential analysis and its application in an outsourcing decision. Design/methodology/approach – A teaching case with practical implications was designed. Teaching notes are also included. Findings – It is important to emphasize the importance of reporting for internal management purposes and the limitations of rule‐based financial reporting in managerial decision making. Understanding of the need for different information for different purposes is essential for business decision making. Any outsourcing decision should encompass both quantitative and qualitative factors. Practical implications – Improves decision‐making process through an analysis of relevant costs in an outsourcing decision. Originality/value – The article creates a practical approach for instructors to explain the use of differential analysis in outsourcing decisions.