Raj's company can either make the components or buy them. He should decide to make the components rather than buy them from a supplier
A) when utilization of plant capacity permits more economical production.
B) when an outside supplier specializes in the production of that component.
C) if in-house operations can concentrate on the firm's specialty-the finished product.
D) if the risk of equipment obsolescence can be transferred to the supplier.

Question

Quizplus · Accepted Answer

A) When a company has unused plant capacity, producing components in-house can be more cost-effective than outsourcing. This is because the fixed costs associated with the plant are already incurred, so the company only needs to consider the variable costs of production.

Raj's Company Can Either Make the Components or Buy Them