In which of the following situations would Company X most likely seek a collaborative arrangement with Company Z in which Company Z would handle work for Company X?
A)Company X has excess capacity.
B)Fixed costs for the work are high, and Company X has large volumes of work.
C)Company X is inexperienced in outsourcing work.
D)Fixed costs for the work are high, and Company X has small volumes of work.

Question

Quizplus · Accepted Answer

If fixed costs for the work are high and Company X has small volumes of work, it may not be economically feasible for Company X to handle the work in-house. In this case, outsourcing to Company Z through a collaboration can be a cost-effective solution. A collaborative arrangement can help Company X to benefit from economies of scale and save on fixed costs. Excess capacity (A) or volume of work (B) are not mentioned as reasons for seeking a collaborative arrangement. Inexperience in outsourcing work (C) is not necessarily a factor as Company X could seek external advice or expertise.

In Which of the Following Situations Would Company X Most