When deciding whether to make or buy a component part, the most relevant consideration is often:
A) The average total cost of making the part.
B) The unavoidable fixed manufacturing costs.
C) The variable manufacturing costs per unit.
D) The sunk cost of equipment used to manufacture the part.

Question

Quizplus · Accepted Answer

The variable manufacturing costs per unit are the most relevant consideration because they directly impact the total cost of producing the part. Comparing the variable costs of producing the part in-house versus outsourcing can help determine which option is more cost-effective. The other options may also be relevant but are not as directly tied to the decision of whether to make or buy the component part.

When Deciding Whether to Make or Buy a Component Part