Relevant Costs in a Make-Or-Buy Decision of a Part Include

question 23

Multiple Choice

Relevant costs in a make-or-buy decision of a part include:

• A)setup overhead costs for the manufacture of the product using the outsourced part.
• B)currently used manufacturing capacity that has alternative uses when part is outsourced.
• C)annual plant insurance costs that will remain the same.
• D)corporate office costs that will be allocated differently.

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Definitions:

Designing Products

The process of creating a new product to meet customer needs or market demand, involving concept creation, design, and development.

Activity Cost Pool

A way to group all the costs related to a specific activity or process, used in activity-based costing.

Direct Labor Rate

The cost per hour that a company pays for direct labor, typically related to the production of goods.

Direct Materials Cost

The cost of raw materials directly used in the production of a product, easily identifiable and assignable to the product.