CAF-5 · Chapter 18 · Question 20 of 20
(Make or Buy & Shutdown Combination) VC to make Rs. 40. Buy price Rs. 48. Making internally incurs avoidable fixed costs of Rs. 60,000 and lost rental income of Rs. 50,000. At what volume is the company indifferent?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) 13,750 units
Explanation
48Q (Buy) = 40Q (Make) + 60,000 (Fixed) + 50,000 (Opp Cost). 8Q = 110,000. Q = 13,750 units.
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