Which of the Following Is Correct When Making a Decision

question 17

Multiple Choice

Which of the following is correct when making a decision about outsourcing?

• A) If the differential costs of making the product exceed the differential costs of outsourcing, the product should be outsourced.
• B) If the unavoidable fixed costs of making the product exceed the unavoidable fixed costs of outsourcing, the product should not be outsourced.
• C) If the differential costs of making the product exceed the differential costs of outsourcing, the product should not be outsourced.
• D) If there are no additional unavoidable fixed costs, the product should be outsourced.

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Definitions:

Bad Debt Expense

An expense recognized by businesses for accounts receivable that are considered unrecoverable and written off.

Net Credit Sales

The total value of sales made on credit minus any returns or allowances, indicating the actual revenue generated from credit transactions.

Allowance Method

An accounting technique used to adjust accounts receivable for debts that are expected not to be collected.

Uncollectible Receivables

Accounts receivable that are considered irrecoverable and unlikely to be collected, leading to their removal from the accounts.