When break-even analysis is applied to an outsourcing decision, the breakeven 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 times the fixed costs
D)the product of the variable costs times the production quantity

Question

Quizplus · Accepted Answer

The breakeven quantity in an outsourcing decision is calculated by dividing the fixed costs by the difference between the variable outsourcing cost and the variable in-house production cost. This helps determine the point at which outsourcing becomes more cost-effective than in-house production.

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