1. Fixed Cost
  2. Variable Cost
  3. Total Cost
  4. Prime Cost

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Answer: Option 2

In ‘make or buy’ decision, it is profitable to buy from outside only when the supplier’s price is below the firm’s own Variable Cost. A variable cost is a corporate expense that changes in proportion to production output. Variable costs increase or decrease depending on a company's production volume; they rise as production increases and fall as production decreases.

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