Opportunity Costs for Insourcing Include the Contribution Margin Foregone from Using

question 136

True/False

Opportunity costs for insourcing include the contribution margin foregone from using the capacity for a new product.

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Definitions:

Average Total Costs

The total cost of production (fixed and variable costs combined) divided by the number of units produced; it shows the cost per unit of output.

Variable Costs

Costs that change in proportion to the level of output in the production process.

Total Fixed Cost

The sum of all costs that remain constant regardless of the level of production or output in the short run.

Marginal Cost

The expense associated with manufacturing an extra unit of a product or service.