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:

Investing Activities

Financial transactions involving the acquisition or disposal of long-term assets and investments not related to the company's primary business operations.

Financing Activities

Transactions related to raising capital or repaying investors, such as issuing stocks or bonds and repaying bank loans.

Going Concern

The assumption that a company will continue its operations in the foreseeable future and has no intention of liquidating its assets.

Cash Flows from Operating Activities

The section of the cash flow statement that shows the cash generated or used by a company's primary business activities.