GEO 110 Chapter 17: chap 17
Document Summary
Chapter 4 relavant costs for non routine operating decisions. Price should be at or above contribution margin: fixed cost = irrelevant, incurred regarless, acceptable if order breaks even minimum acceptable price is equal to the incremental cost (most variable costs and some fixed) Insource or outsource: outsourcing: practice of finding outside vendors to supply products and services, make or buy decisions for manufacturers. Insourcing: practice of providing a good or service from internal resources. General rule for make or buy decisions: chose the option with the lowest relevant cost, outsourcing costs vs. incremental costs for in sourcing. The managers will be indifferent at the volume where the cost in-house is the same as the cost of outsourcing: