When break-even analysis is applied to an outsourcing decision, the break-even quantity is _____.
A) the ratio of fixed costs to the difference between variable outsourcing cost and variable in-house production cost
B) the ratio of the difference between variable outsourcing cost and variable in-house production cost to fixed costs
C) the product of the variable costs and the fixed costs
D) the product of the variable costs and the production quantity

Question

Quizplus · Accepted Answer

The break-even quantity in the context of an outsourcing decision is calculated as the ratio of fixed costs to the difference between variable outsourcing cost and variable in-house production cost. This calculation helps determine the quantity at which the costs of outsourcing and in-house production are equal.

When Break-Even Analysis Is Applied to an Outsourcing Decision, the Break-Even