Which of the following costs are not considered in a differential analysis for a make-or-buy decision? A) Indirect materials and indirect labor if the item is manufactured internally. B) Direct materials and direct labor if the item is purchased. C) Variable overhead if the item is manufactured internally. D) Fixed overhead that will continue if the item is purchaseD. A cost that does not change is not included in the analysis

Question

Quizplus · Accepted Answer

Fixed overhead that will continue if the item is purchased is not considered in the differential analysis for a make-or-buy decision because it is a sunk cost that does not change based on the decision. The other costs mentioned (A, B, and C) are all relevant costs that should be considered in the analysis.

Which of the Following Costs Are not Considered in a Differential