Barkley Company Currently Makes a Product Internally,but Is Considering Outsourcing

question 10

Multiple Choice

Barkley Company currently makes a product internally,but is considering outsourcing production.Barkley rents a special machine used to make the product,and would no longer need this machine if the part is outsourced.The rent on the machine is what type of cost for this make-or-buy decision?

• A)sunk and not differential.
• B)avoidable and differential.
• C)unavoidable and differential.
• D)avoidable and not differential.
• E)None of the answer choices is correct.

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Definitions:

Payoff

In game theory, the reward received by a player (for example, the profit earned by an oligopolist).

Dominant Strategy

A dominant strategy is the best course of action for a player in a game, regardless of what the other players do, always resulting in a better outcome for the player.

Game Theory

The study of strategic interactions among rational decision-makers.

Prisoners' Dilemma

A scenario in game theory where two players, each pursuing their own best interests, fail to achieve the best result for both.