Which of the following costs is relevant to a make-or-buy decision?
A)original cost of the production equipment
B)annual depreciation of the equipment
C)the amount that would be received if the production equipment were sold
D)the cost of direct materials purchased last month and used to manufacture the component

Question

Quizplus · Accepted Answer

The amount that would be received if the production equipment were sold (C) is relevant because it represents a potential inflow of cash that would only be realized if the decision were made to buy rather than make. This could offset some of the costs of buying.

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