Costs relevant to a make-versus-buy decision typically include variable manufacturing costs as well as:
A) Avoidable fixed costs.
B) Factory depreciation.
C) Unavoidable costs, both production and marketing.
D) Property taxes on the manufacturing facility.
E) Factory administrative costs (e.g., salaries).

Question

Quizplus · Accepted Answer

When making a make-versus-buy decision, it is important to consider avoidable fixed costs along with variable manufacturing costs. These are costs that can be avoided if the decision is made to buy instead of make the product. Other fixed costs, such as factory depreciation and property taxes, are not relevant to this decision as they do not change whether the product is made or bought. Similarly, unavoidable costs are not relevant as they cannot be avoided regardless of the decision. Administrative costs may be relevant depending on the specific circumstances of the decision.

Costs Relevant to a Make-Versus-Buy Decision Typically Include Variable Manufacturing