Which of the following costs is relevant to a make-or-buy decision of a particular part of a product?
A)The direct labor costs used to manufacture the part
B)The fixed annual rent paid for the office building
C)The salary of the sales manager who sells the product
D)The depreciation on the plant used to manufacture the part

Question

Quizplus · Accepted Answer

The direct labor costs used to manufacture the part are relevant to the make-or-buy decision because if the company decides to make the part, they will incur these costs, but if they decide to buy the part from a supplier, they will not. The other options listed (fixed annual rent, sales manager salary, and plant depreciation) are not relevant to this specific decision as they are not directly related to the production of the part in question.

Which of the Following Costs Is Relevant to a Make-Or-Buy