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

Question

Quizplus · Accepted Answer

By outsourcing the activities that drive overhead costs, the overhead costs of Julianna LLC would decrease. This means that the cost of goods purchased from suppliers would increase as the company would be relying more on external sources to meet its needs. Therefore, the correct answer is choice A, which states that overhead costs would decrease and the cost of goods purchased from suppliers would increase.

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