Gecko Company Is Evaluating the Use of a Supplier Versus

question 61

Multiple Choice

Gecko Company is evaluating the use of a supplier versus making the wheels for its skateboards internally.The currently manufactured wheels have a variable unit cost of $2.Fixed costs are $16,000 per month, however, 25% can be eliminated if wheels are no longer produced.A supplier has offered to produce this part for $3 per wheel and can produce the 3,200 wheels for the 800 skateboards needed monthly.Should Gecko outsource wheels or make them internally?

• A)Outsource because the incremental cost savings is $12,800.
• B)Make the product because the incremental cost savings is $3,200.
• C)Outsource because the incremental cost savings is $800.
• D)Outsource because the incremental cost savings is $8,800.

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Definitions:

Mental Steps

The cognitive processes individuals go through to reach a decision or solve a problem.

Buying Decision

The process by which a consumer decides whether to purchase a product or service, influenced by factors like needs, desires, and budget.

Startup

A newly established business, often in the tech sector, focusing on a unique product or service aiming for rapid growth.

Salesperson

An individual who sells goods or services to customers, aiming to meet their needs and drive company revenue.