Bjorn and Karl work as product managers for a medium-sized manufacturing firm in Cologne, Germany. Both are evaluated on their respective product's reported profit and are given considerable autonomy in terms of production methods, distribution, and pricing. Their firm has adopted a strategy of automating the production process as much as possible. Yet, as it has done for many years, the firm continues to allocate all overhead to individual products based on the number of labor hours consumed by each product. During drinks one evening, Bjorn and Karl started talking shop. Bjorn complained that the allocation mechanism penalizes his product line because of its high labor content. Karl laughed and said, "There is an easy way to fix that problem! Start buying more components from suppliers instead of making them yourself