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

question 139

Multiple Choice

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

• A) setup overhead for the manufacture of the product using the outsourced part
• B) currently used manufacturing capacity that has alternative uses
• C) annual plant insurance costs that will remain the same
• D) management consultant fees to restructure the organization framework of the company

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Definitions:

Labour Rate Variance

A measurement of the difference between actual labor costs and what those costs should have been according to standard rates.

Quantity Standards

Quantity standards refer to the specified amount of materials, labor, and overhead that should be used for producing one unit of goods, serving as benchmarks for measuring efficiency.

Standard Costing

A cost accounting method that assigns expected costs to products, which are then compared with actual costs to measure performance.

Variable Overhead

Overhead costs that fluctuate with changes in production activity levels, such as utilities or materials used in production.