In a Make or Buy Decision

question 76

Multiple Choice

In a make or buy decision:

• A)Only variable costs are relevant.
• B)Fixed costs that can be avoided in the future are relevant.
• C)Fixed costs that will continue regardless of the decision are relevant.
• D)Only opportunity costs are relevant.

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Definitions:

Transfer Prices

Prices charged for the sale of goods or services between divisions within the same company, often used for cost allocation and performance evaluation.

Segments

Different parts or areas of a business or market that can be separately analyzed.

ROI

Return on Investment is a measure used to evaluate the efficiency or profitability of an investment, calculated by dividing net profit by the cost of the investment.

Operating Assets

Assets used by a business in its daily operations to generate income, including cash, inventory, and equipment.