Which of the following costs is irrelevant to a make-or-buy decision?

Question

Quizplus · Accepted Answer

The relevant costs in the make-or-buy decision are the incremental costs that will be incurred if the part is produced in-house as compared to the costs that will be incurred if the part is purchased from an outside supplier. Direct labor cost (A) and supervisor's salary to be avoided (C) are relevant costs because they are incremental costs that will be saved if the company chooses to purchase the part from an outside supplier. Rent from leasing the production space (D) is also relevant because it is an incremental cost that will be incurred if the part is produced in-house. Depreciation on the plant (B) is not relevant because this cost has already been incurred and is a sunk cost that cannot be changed by the make-or-buy decision.

Which of the Following Costs Is Irrelevant to a Make-Or-Buy