The manager of Hampton,Inc.is trying to decide whether to make or buy a component of the product it sells.Which of the following costs and benefits is not relevant to the decision?
A)Direct labor cost involved in making the component
B)The purchase price of the component if it is bought
C)Variable manufacturing overhead involved in making the component
D)The selling price of the product

Question

Quizplus · Accepted Answer

The selling price of the product is not relevant to the make or buy decision as it does not affect the cost of making or buying the component. The decision only pertains to the cost of the component itself and its impact on the overall production cost. The other options (A, B, and C) are all relevant costs in the make or buy decision as they directly relate to the cost of producing the component.

The Manager of Hampton,Inc