Relevant Costs for a Make-Or-Buy Decision for a Component Part

question 71

Multiple Choice

Relevant costs for a make-or-buy decision for a component part include all the following except:

• A) Fixed salaries that will not be incurred if the part is outsourced.
• B) Payroll tax (unemployment insurance cost), because of outsourcing.
• C) Material-handling costs that can be eliminated if the part is outsourced.
• D) Fixed overhead currently being allocated to the part.
• E) Current direct material costs for the part.

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Definitions:

Merchandise Returned

Goods that are sent back to the seller by the buyer, usually due to defects, incorrect orders, or other reasons.

FOB Destination

A term in shipping indicating that the seller retains ownership and responsibility for the goods until they are delivered to the buyer's location.

Prepaid Freight Costs

Expenses paid in advance for the transportation of goods, often included in the inventory cost.

Sales Amount

The total revenue generated from the sale of goods or services over a specific period.