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In ‘make or buy’ decision, it is profitable to buy from outside only when the supplier’s price is below the firm’s own ______________.
- AFixed Cost
- BVariable Cost
- CTotal Cost
- DPrime Cost
Correct answer: B
Discussion 1
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Variable Cost
In ‘make or buy’ decision, it is profitable to buy from outside only when the supplier’s price is below the firm’s own Variable Cost. A variable cost is a corporate expense that changes in proportion to production output. Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases.
In ‘make or buy’ decision, it is profitable to buy from outside only when the supplier’s price is below the firm’s own Variable Cost. A variable cost is a corporate expense that changes in proportion to production output. Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases.