When deciding whether an item should be produced internally or purchased from an outside supplier, a company should buy from an outside supplier if: Incremental revenues < Total relevant costs Total relevant cost of making > Outside purchase price Contribution margin lost > Fixed costs avoided + Contribution margin gained on other items Incremental revenues > Total relevant costs What is the profitability index formula? Profitability index = Contribution margin per unit/Quantity of constrained resource required Profitability index = Contribution margin per unit/Quantity of constrained resource required per unit Profitability index = Contribution margin / Quantity of constrained resource required per unit Profitability index = Contribution margin / Quantity of constrained resource required What is an example of a constrained resource? Limited raw materials available Availability of labour-hours Availability of machine-hours All of the above