In Deciding Whether to Manufacture a Part or Buy It

question 31

Multiple Choice

In deciding whether to manufacture a part or buy it from an outside vendor,which of the following represents a cost that is not relevant to the short-run decision?

• A)direct labor.
• B)variable overhead.
• C)fixed overhead that will be avoided if the part is bought from an outside vendor.
• D)fixed overhead that will continue even if the part is bought from an outside vendor.

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Definitions:

Acquisition Transaction

A business deal in which one company acquires another, either through purchase, merger, or other method.

Credit Balance

An accounting entry that appears on the right-hand side of an account, indicating that funds have been received or that an amount is owed.

Common Stock

Represents equity ownership in a corporation, providing voting rights and a share in the company's profits via dividends.

Consolidated Equipment

Assets, particularly machinery and equipment, reported in a unified manner for a parent company and its subsidiaries.