Shasta Company is trying to decide whether to continue to manufacture a particular component or to buy the component from an outside supplier. Which of the following is irrelevant with respect to this decision?

Question

Quizplus · Accepted Answer

The fixed manufacturing costs associated with the manufacture of the component are irrelevant because they will be incurred regardless of whether the component is manufactured in-house or purchased from an outside supplier. The relevant factors to consider are the quality and timeliness of the outside supplier's product and the opportunity cost of using the facilities for alternative purposes.

Shasta Company Is Trying to Decide Whether to Continue to Manufacture