In Deciding Whether to Manufacture a Part or Buy It

question 1

Multiple Choice

In deciding whether to manufacture a part or buy it from an outside supplier, which of the following is an irrelevant cost?

• A) Direct labour
• B) Variable overhead
• C) Fixed overhead that will be avoided if the part is purchased from an outside supplier
• D) Fixed overhead that will continue even if the part is purchased from an outside supplier

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Definitions:

IFRS

International Financial Reporting Standards, a set of accounting rules globally recognized for preparing financial statements.

GAAP

Generally Accepted Accounting Principles; a set of accounting standards, principles, and procedures that companies must follow when compiling their financial statements in the U.S.

Balance Sheet

A financial report that captures a company's financial status at a particular moment, detailing its assets, liabilities, and shareholders' equity.

IFRS

International Financial Reporting Standards, a set of accounting standards developed by the International Accounting Standards Board (IASB) that guide the preparation and presentation of financial statements on a global scale.