Which of the Following Would Be a Good Reason to Outsource

question 52

Multiple Choice

Which of the following would be a good reason to outsource (buy) versus making?

• A) To utilize existing capacity within a company's own firm
• B) A firm lacks the technology or expertise to produce an item
• C) To have more direct control over the design and production of an end item
• D) No competent supplier presently produces the needed item

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Definitions:

After-tax Salvage Value

The value of a depreciated asset after deducting any taxes owed on the sale of the asset.

Incremental Operating Cash Flow

The additional amount of cash flow a company generates from its operating activities due to a specific decision or project.

Capital Spending

Expenditures by a company for the acquisition or improvement of long-term assets such as property, plants, and equipment in order to expand its operations or efficiency.

Sunk Cost

Costs that have already been incurred and cannot be recovered, and thus should not influence current/future business decisions.