Which of the following are relevant in a make or buy decision?
Variable Avoidable fixed Unavoidable fixed
$\text {\underline{ costs} }$ $\text {\underline{ costs} }$ $\text {\underline{ costs} }$

A)no yes yes
B)yes no yes
C)no no yes
D)yes yes no

Question

Which of the following are relevant in a make or buy decision?
Variable              Avoidable fixed            Unavoidable fixed
$\text {\underline{  costs} }$                   $\text {\underline{  costs} }$                          $\text {\underline{  costs} }$

A)no yes yes
B)yes no yes
C)no no yes
D)yes yes no

Quizplus · Accepted Answer

In a make or buy decision, both variable and avoidable fixed costs are relevant. Variable costs are costs that change with the level of production, such as labor and materials. Avoidable fixed costs are costs that can be eliminated if the company decides not to produce the product or service, such as rent or insurance. Unavoidable fixed costs, on the other hand, are costs that will be incurred regardless of whether the company makes or buys the product, such as property taxes or salaries of managers. Therefore, the best choice would be D, which includes both variable and avoidable fixed costs, but not unavoidable fixed costs.

Which of the Following Are Relevant in a Make or Buy