During 2016, it cost Westa, Inc.$18 per unit to produce part T5.During 2017, it has increased to $21 per unit.In 2017, Southside Company has offered to provide Part T5 for $16 per unit to Westa.As it pertains to the make-or-buy decision, which statement is true?
A)Differential costs are $5 per unit.
B)Incremental costs are $2 per unit.
C)Net relevant costs are $2 per unit.
D)Incremental revenues are $3 per unit.

Question

Quizplus · Accepted Answer

The differential cost is the difference in cost between making the part in-house ($21) and buying it from Southside Company ($16), which is $5 per unit.

During 2016, It Cost Westa, Inc