In a make-or-buy decision, the original purchase price of equipment that is currently used in the manufacturing process is usually a relevant cost because the equipment can be sold for its salvage value.

Question

Quizplus · Accepted Answer

The original purchase price of equipment is a sunk cost and not relevant to future decisions such as make-or-buy decisions. Only future costs and benefits, like potential salvage value, are relevant.

In a Make-Or-Buy Decision, the Original Purchase Price of Equipment