Action Products Is Deciding Whether to Outsource Production of a Certain

question 17

Multiple Choice

Action Products is deciding whether to outsource production of a certain component that is included in all of its products.It currently costs Action Products $0.95 to make each component in-house.If Action Products outsources,it can buy the component ready-made for $0.80 each.If Action Products outsources,it could shut down the production facilities it is currently using to manufacture the component,and save $10 000 a year in fixed costs.After analysing both options,Action Products decided to continue making the component in-house.In the analysis done,which of the following items would be considered an opportunity cost?

• A) The difference between the fixed and variable costs to make the component in-house
• B) The contract cost of $0.80 to buy from outside source
• C) The savings of $10 000 per year in fixed costs
• D) The difference between $0.95 and $0.80 per component

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Definitions:

Standard Deviation

A statistical measure that quantifies the variability or spread of a set of numbers around their mean; it helps in assessing data consistency.

Q Index Fund

A type of investment fund that aims to replicate the performance of a specific index, often by holding the same assets as the index.

Expected Monetary Value

A calculated projection of the potential financial gain or loss from an investment or decision under uncertainty.