In a make-versus-buy analysis, what is the correct equation for X?
A) X = (Vb - Vm)/(Fm - Fb)
B) X = P/(F - V)
C) X = F/(P - V)
D) X = (Fm - Fb)/(Vb - Vm)

Question

Quizplus · Accepted Answer

The correct equation for a make-versus-buy analysis is X = (Fm - Fb)/(Vb - Vm), where Fm is the total cost of producing the item in-house, Fb is the total cost of outsourcing the item, Vb is the volume of the item needed, and Vm is the minimum volume that makes producing the item in-house economically feasible. This equation helps determine whether it is more cost-effective to make an item in-house or outsource it based on the volume needed and the associated costs. Therefore, the best choice is D.

In a Make-Versus-Buy Analysis, What Is the Correct Equation for X