In a make-or-buy decision, relevant costs include:
A)unavoidable fixed costs
B)avoidable fixed costs
C)fixed factory overhead costs applied to products
D)fixed selling and administrative expenses

Question

Quizplus · Accepted Answer

Relevant costs in a make-or-buy decision should only include avoidable costs, which are costs that can be eliminated if the company chooses a certain alternative. Avoidable fixed costs, such as salaries of employees who would no longer be needed if the company decides to outsource a job, would be considered relevant in this decision. Unavoidable fixed costs, fixed factory overhead costs applied to products, and fixed selling and administrative expenses would not be relevant in a make-or-buy decision.

In a Make-Or-Buy Decision, Relevant Costs Include