CAF-5 · Chapter 15 · Question 2 of 10
In a "Make or Buy" (outsourcing) decision, which of the following costs is generally considered relevant when calculating the financial impact of manufacturing the component in-house?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: C) Variable production costs and directly attributable avoidable fixed costs
Explanation
In a make-or-buy decision, the relevant costs of manufacturing in-house are those that would be saved if the item were outsourced. This includes variable costs and any specific fixed costs (like hiring a specific supervisor) that are directly attributable and avoidable. General overheads and depreciation are irrelevant.
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