If a company decides to outsource and then has freed capacity,the decision on what to do with that freed capacity would be based upon:

Question

Quizplus · Accepted Answer

The decision on what to do with freed capacity would be based on opportunity costs, which refer to the potential benefits that could be gained by utilizing the freed capacity in alternative ways. The company would need to consider the potential revenue and profit opportunities that could be generated by using the freed capacity for other purposes, such as developing new products, expanding existing operations, or improving customer service. Avoidable and unavoidable fixed costs are not relevant factors in this decision, as they are fixed regardless of whether capacity is fully utilized or not.

If a Company Decides to Outsource and Then Has Freed