Which of the Following Costs Is NOT Relevant to a Make-Or-Buy

question 72

Multiple Choice

Which of the following costs is NOT relevant to a make-or-buy decision?

• A) $10,000 of direct labor used to manufacture the parts
• B) $30,000 of depreciation on the plant used to manufacture the parts
• C) the supervisor's salary of $25,000 that will be avoided if the part is purchased from an outside supplier
• D) $15,000 in rent from leasing the production space to another company if the part is purchased from an outside supplier

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Definitions:

NCI

Stands for Non-Controlling Interest, which is a portion of a subsidiary not owned by the parent company, yet reflected in the consolidated financial statements.

Share Capital

The amount of money a company has raised by issuing shares to shareholders.

Bargain Purchase

A transaction in which a buyer acquires assets, or occasionally a business, for a price considered to be significantly lower than the fair market value.

Intragroup Services

Services rendered by one entity within a larger corporate group to another entity within the same group.