Which of the Following Costs Is Relevant to a Make-Or-Buy

question 30

Multiple Choice

Which of the following costs is relevant to a make-or-buy decision?

• A)original cost of the production equipment
• B)annual depreciation of the equipment
• C)the amount that would be received if the production equipment were sold
• D)the cost of direct materials purchased last month and used to manufacture the component

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Definitions:

Negotiable Instrument

A voucher guaranteeing that a specified sum of money will be paid, either when demanded or at a certain time, with the payer’s identity specified on the voucher.

Substitute

In a legal or contractual context, to replace one obligation, duty, or individual with another.

Cash

represents money in the physical form of currency, such as coins and banknotes, used to purchase goods, services, or settle debts.

Certify

To officially recognize, verify, or declare something as true, accurate, or in compliance with certain standards.