In Deciding Whether to Manufacture a Part or Buy It

question 10

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 labor
• 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:

Common Stock

A type of equity security that represents ownership in a corporation, giving holders voting rights and a share in the company's profits through dividends.

Paid-In Capital

The total amount of money that a company has received from shareholders in exchange for shares of stock, exceeding the par value of the shares.

Stock Split

An action by a company to increase the number of its outstanding shares by issuing more shares to current shareholders, usually to make the stock more affordable.

Common Stock

A type of equity ownership in a corporation, where holders have voting rights and potentially receive dividends.