Answer (B) is correct . Available resources should be used as efficiently as possible before outsourcing. If the total relevant costs of production are less than the cost to buy the item, it should be produced in-house. The relevant costs are those that can be avoided.
Answer (A) is incorrect because Whether operations are at normal volume is less important than the amount of idle capacity. The company is less likely to buy if it has sufficient unused capacity.
Answer (C) is incorrect because Total costs (absorption costing) are not as important as relevant costs.
Answer (D) is incorrect because Activity-based costing is used to allocate fixed overhead. Fixed overhead is not relevant in an insourcing vs.?outsourcing decision unless it is avoidable.
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