if management decides to buy the cupholders from outside suppliers rather than to continue making the part, what would be the annual financial advantage

The correct answer to this open question is the following.

Although there are no options attached, neither a case nor example for reference, we can comment on the following.

If management decides to buy the cupholders from outside suppliers rather than to continue making the part, the annual financial advantage would be that the company will save on fixed costs, the ones implied on hiring and paying people their salaries to produce the cupholders on a monthly basis. Also, the costs of machines to fabricate them.

That is why companies have to smartly decide about the so-called "make-or-buy decision." The best recommendation to make the correct decision is to apply a quantitative analysis.

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