In a Make or Buy Decision,the Opportunity Cost of Capacity

question 70

Multiple Choice

In a make or buy decision,the opportunity cost of capacity could

• A)be considered to decrease the price of units purchased from suppliers.
• B)be considered to decrease the cost of units manufactured by the company.
• C)be considered to increase the price of units purchased from suppliers.
• D)not be considered since opportunity costs are not part of the accounting records.

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Definitions:

Manufacturing Overhead Budget

The manufacturing overhead budget estimates the costs of all manufacturing overhead items for a forthcoming period, aiding in the financial planning of production.

Cash Disbursements

The total amount of cash paid by a business, including expenses, debt service, and purchases of assets.

Selling and Administrative Expense Budget

A projected financial statement detailing the expected costs related to selling the product and managing the business.

Budgeted Sales

Projected revenue from goods or services sold, as estimated during a company's budgeting process.