Relevant costs for a make-or-buy decision for a component part include all the following except:
A) Fixed salaries that will not be incurred if the part is outsourced.
B) Payroll tax (unemployment insurance cost), because of outsourcing.
C) Material-handling costs that can be eliminated if the part is outsourced.
D) Fixed overhead currently being allocated to the part.
E) Current direct material costs for the part.

Question

Quizplus · Accepted Answer

Fixed overhead currently being allocated to the part is not a relevant cost because it will remain unchanged regardless of whether the part is made in-house or outsourced. Relevant costs are those that will change as a result of the decision.

Relevant Costs for a Make-Or-Buy Decision for a Component Part