In a "make-or-buy" decision:
A) Only variable costs are relevant.
B) Fixed costs that can be avoided in the future are relevant.
C) Fixed costs that will continue regardless of the decision are relevant.
D) Only opportunity costs are relevant.
E) Opportunity costs are generally zero.

Question

Quizplus · Accepted Answer

Fixed costs that can be avoided in the future are relevant in a "make-or-buy" decision because they represent potential savings if the company decides to buy instead of make. These costs would not be incurred if the production is outsourced, making them directly relevant to the decision.

In a "Make-Or-Buy" Decision