In a make or buy decision,which of the costs below are relevant?
A) Fixed costs that will not change regardless of the decision.
B) Only conversion costs.
C) Fixed costs that can be avoided in the future if the decision is to buy.
D) Only direct material costs.

Question

Quizplus · Accepted Answer

In a make or buy decision, we need to consider the relevant costs that will differ between making or buying the product/service. Fixed costs that can be avoided in the future if the decision is to buy are relevant as they will impact the overall cost of making or buying. Direct material costs are not relevant as they will be the same whether we make or buy the product. Conversion costs and fixed costs that will not change regardless of the decision are also not relevant.

In a Make or Buy Decision,which of the Costs Below