For make-or-buy decisions, relevant costs include ________.
A) incremental costs plus sunk costs
B) incremental costs plus opportunity costs
C) differential costs plus fixed costs
D) incremental costs plus differential costs

Question

Quizplus · Accepted Answer

Relevant costs for make-or-buy decisions include incremental costs, which are the additional costs incurred if an action is taken, and opportunity costs, which represent the benefits foregone by not choosing the next best alternative. Sunk costs are not considered because they have already been incurred and cannot be recovered, and fixed costs are not always relevant unless they change as a result of the decision. Differential costs are essentially the same as incremental costs, so listing both is redundant.

For Make-Or-Buy Decisions, Relevant Costs Include ________