Gnome Company Is Deciding Whether to Continue to Manufacture a Component

question 44

Multiple Choice

Gnome Company is deciding whether to continue to manufacture a component or to buy the component from a supplier.Which of the following is relevant to this decision?

• A) the potential uses of the facilities that are currently used to manufacture the component
• B) the insurance on the manufacturing facility that will continue regardless of the decision
• C) fixed costs that do not differ between the alternatives
• D) the cost of the equipment that is currently being used to manufacture the component

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Definitions:

Differentiated Products

Goods or services that are distinguished from each other by specific features, branding, or quality, making them non-perfect substitutes in the eyes of consumers.

Competitive Market

A market structure characterized by a large number of buyers and sellers, wherein no single entity has significant power to dictate market conditions.