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 can be avoided if the item is purchased
E)Fixed overhead that will continue if the item is purchased

Question

Quizplus · Accepted Answer

Fixed overhead that will continue if the item is purchased is not considered in a differential analysis for a make-or-buy decision, as it is a sunk cost that would remain regardless of the decision. The other costs listed may be relevant in determining whether it is more cost-effective to make or buy the item.

Which of the Following Costs Are Not Considered in a Differential