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 unavoidable fixed manufacturing costs associated with the manufacture of the component are irrelevant because they will be incurred regardless of whether Shasta Company decides to manufacture the component or buy it from an outside supplier. The relevant factors are the cost of production, the cost of purchasing from the outside supplier, the quality of the component, and the supplier's ability to deliver on time. The alternative uses of the facilities currently being used to manufacture the component is also relevant because it could impact the company's production capacity and ultimately its revenue.

Shasta Company Is Trying to Decide Whether to Continue to Manufacture