In a make-or-buy decision relevant costs would include all of the following except:
A)Depreciation expense on the plant equipment currently used to make the part
B)Direct labor costs of the employees in that department which makes the part
C)Direct material costs of the part
D)The cost of buying the part from an outside company

Question

Quizplus · Accepted Answer

Depreciation expense on the plant equipment currently used to make the part is not a relevant cost in a make-or-buy decision because it is a sunk cost that has already been incurred and cannot be changed by the decision to make or buy the part. Relevant costs are future costs that will change depending on the decision made. B, C, and D are all relevant costs that should be considered in a make-or-buy decision.

In a Make-Or-Buy Decision Relevant Costs Would Include All of the Following