In a Make or Buy Decision, Which of the Costs

question 32

Multiple Choice

In a make or buy decision, which of the costs below are relevant

• A)Only conversion costs.
• B)Fixed costs that can be avoided in the future if the decision is to buy.
• C)Only direct material costs.
• D)Fixed costs that will not change regardless of the decision.

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Definitions:

Raw Materials

The basic materials and components used in the production process to create finished goods.

Journal Entries

Records of financial transactions in accounting, indicating debit and credit amounts for each transaction in the ledger.

Indirect Materials

Materials used in the production process that do not become an integral part of the final product and are not directly assigned to specific units produced.

Direct Materials

Raw materials that are directly traceable to the manufacturing of a product and constitute an integral part of the finished product.