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

Differential analysis for make-or-buy decision only considers costs that vary between the two options. Fixed overhead that will continue regardless of whether the item is made or bought should not be considered in the analysis. Therefore, option E is not considered in a differential analysis for a make-or-buy decision.

Which of the Following Costs Are Not Considered in a Differential