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 purchased. B) Direct materials and direct labor if the item is manufactured internally. C) Variable overhead if the item is purchased. D) Fixed overhead that will continue if the item is purchaseD. A cost that does notchange is not included in the analysis

Question

Quizplus · Accepted Answer

Fixed overhead costs that will continue whether or not the item is purchased or manufactured internally are not considered in the differential analysis for a make-or-buy decision. This is because these costs are considered sunk costs and will not be affected by the decision to make or buy the item. The other costs mentioned in the options (indirect materials and labor, direct materials and labor, and variable overhead) are all relevant costs that should be considered in the analysis.

Which of the Following Costs Are Not Considered in a Differential