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

question 30

Multiple Choice

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

• A)original cost of the production equipment
• B)annual depreciation of the equipment
• C)the amount that would be received if the production equipment were sold
• D)the cost of direct materials purchased last month and used to manufacture the component

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Definitions:

Job-Order Costing System

A cost accounting system that assigns manufacturing costs to each product, allowing detailed tracking of expenditures.

Direct Labor-Hours

The total hours of labor work directly on manufacturing a product or providing a service, often used in costing and pricing decisions.

Milling Department

A section within a manufacturing facility where the process of grinding, cutting, pressing, or crushing materials occurs.

Overhead Applied

The portion of manufacturing overhead costs allocated to each unit of production based on a predetermined rate or method.