Relevant Costs in a Make-Vs

question 3

Multiple Choice

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

• A) Corporate headquarter costs that will be allocated differently depending on the decision option chosen.
• B) Setup overhead costs for the manufacture of the product using the outsourced part.
• C) The cost of currently used manufacturing capacity that has alternative uses if the part is outsourced.
• D) Factory-related insurance cost.
• E) Corporate (i.e., headquarter) salaries.

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Definitions:

Unearned Revenues

Liabilities representing payments received for goods or services that have not yet been delivered or performed.

Deferred Revenues

Income received by a company for goods or services yet to be delivered or performed, recorded as a liability on the balance sheet until earned.

Future Wages

Compensation that an employee is expected to earn in upcoming periods for services to be rendered.

Liabilities

Financial obligations or debts that a company owes to others, which must be settled over time through the transfer of assets, provision of services, or other forms of economic benefit.