In a Make or Buy Decision, Management Should Focus on Costs

question 94

True/False

In a make or buy decision, management should focus on costs that are the same under the two alternatives.

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Definitions:

Short Run

A period in economics during which at least one factor of production is fixed, limiting the ability to fully adjust to new market conditions.

Long Run

The time period in economics during which all inputs or factors of production can be adjusted or changed, contrary to the short run where some inputs are fixed.

Long-Run Average Total Cost Curve

A graphical representation illustrating the per unit cost of producing a good or service in the long run, when all inputs are variable.

Fixed Cost

Expenses that do not change with the level of output or sales in the short term, such as rent, salaries, and insurance.