In Deciding Whether to Manufacture a Part or Buy It

question 47

Multiple Choice

In deciding whether to manufacture a part or buy it from an outside vendor, a cost that is irrelevant to this short-run decision is:

• A) Direct labor.
• B) Variable overhead.
• C) Fixed overhead that will be avoided if the part is bought from an outside vendor.
• D) Fixed overhead that will continue even if the part is bought from an outside vendor.
• E) Transportation-in charges assessed on external purchases.

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Definitions:

Total Revenue

Total Revenue is the entire amount of income generated by the sale of goods or services related to a company's primary operations.

Abba Lerner

An economist known for his contributions to Keynesian economics, particularly his work on the theory of functional finance.

Adam Smith

An 18th-century Scottish economist and philosopher known for his theories on free market economies and the concept of the "invisible hand."

Karl Marx

A 19th-century philosopher, economist, and political theorist known for his critical analysis of capitalism and his influence on the development of socialism and communism.