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31 differential revenue is the difference in total revenue between two alternatives 4301341

 

31) Differential revenue is the difference in total revenue between two alternatives.

32) Outsourcing is purchasing goods and services from outside vendors.

 

33) If a company is deciding whether to outsource a part, the quality of the parts manufactured is an important factor to consider.

 

34) Outsourcing is risk free to the manufacturer because the supplier now has the responsibility of producing the part.

 

35) Decisions about whether a producer of goods or services will insource or outsource are also called make-or-buy decisions.

 

36) In a make-or-buy decision when there are alternative uses for capacity, the opportunity cost of idle capacity is relevant.

 

37) An incremental cost is the difference in total irrelevant costs between two alternatives.

 

38) When opportunity costs exist, they are always relevant.

39) When capacity is constrained, relevant costs equal incremental costs plus opportunity costs.

 

40) Incremental revenue is the sum of differential revenues of two alternatives.

 

 

 

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