Supply Chain Management Professional (SCMP) · Question
When conducting a 'make-or-buy' analysis, what type of cost is most critical to consider for the 'make' option?
Opportunity cost represents the value of the next best alternative given up when making a decision. It's crucial for understanding the true cost of making an it
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Question: When conducting a 'make-or-buy' analysis, what type of cost is most critical to consider for the 'make' option?
Answer options:
- Sunk costs ✅ Opportunity costs
- Fixed administrative costs
- Non-recurring engineering costs
Correct answer: Opportunity costs
Explanation: Opportunity cost represents the value of the next best alternative given up when making a decision. It's crucial for understanding the true cost of making an item internally.
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