Answer:
If the company makes the units in-house, it will save $10,000.
Explanation:
<u>The fixed costs will remain in both options. Therefore, the fixed costs are irrelevant to the decision-making process.</u>
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Buy:
Total cost= 10,000*16= $160,000
Make in house:
Total cost= 10,000*(9 + 4 + 2)= $150,000
If the company makes the units in-house, it will save $10,000.
Out of the following choices given, the budget item that would probably be considered a fixed expense is insurance premiums. Entertainment, savings, and clothing expenses can change from week to week or from month to month. Insurance will be a fixed amount for a year at a time and most likely won't change. The correct answer is D.
<u>Answer:</u> Sunk cost
<u>Explanation:</u>
Sunk cost means the expense which has been already met by the firm and they cannot be recovered at any rate. Sunk costs are not based on the future decisions as these expenses for the firm are the same irrelevant to the project which it is assigned. Sunk costs are not a part of the budget plan.
In the given scenario the delivery company has spent $3500 in order to upgrade the truck. So $3500 is treated as sunk cost in the proposed project.
