Julianna LLC Is Facing a Make-Or-Buy Decision and Must Decide

question 101

Multiple Choice

Julianna LLC is facing a make-or-buy decision and must decide whether to meet its needs internally or to acquire goods or services from external sources.Julianna LLC adopted an activity-based costing system and found that its overhead costs were more than 50 percent of total product costs and the managers wanted to identify the activities that drove overhead costs.Based on the cost of activities,the management decided to outsource many of the activities that drove overhead costs.The expected result of this action would be that
Overhead costs cost of goods purchased from suppliers

• A)decreased increased
• B)decreased decreased
• C)increased increased
• D)increased decreased

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Definitions:

Net Income

The total earnings of a company after all expenses and taxes have been deducted from revenue.

Contribution Margin

The amount remaining from sales revenue after variable expenses are deducted, used to cover fixed costs and generate profits.

Gross Margin

Gross Margin is the difference between revenue and the cost of goods sold, divided by revenue, expressed as a percentage. It indicates the percentage of revenue that exceeds the cost of goods sold.

Special Order

A special order refers to a one-time order that is not part of the regular, ongoing business operations and usually requires consideration of additional costs and pricing.