Question

Shasta Company is trying to decide whether to continue to manufacture a particular component or to buy the component from an outside supplier. Which of the following is irrelevant with respect to this​ decision?
A.the outside​ supplier's ability to deliver the component on a timely basis
B.the alternative uses of the facilities currently being used to manufacture the component
C.the quality of the component purchased from the outside supplier
D.the unavoidable fixed manufacturing costs associated with the manufacture of the component

Answer 1

Answer:

D

Explanation:

Unavoidable fixed manufacturing cost is irrelevant as to Shasta Company’s decision to Make or Buy that particular component. It is because, either of their decision, said expense will still incur and it is still form part of their expenses. The only things that will matter to their decision making if that certain expenses will cause changes (decrease in particular) of the potential cost to be incurred by the company that will result to increment their income.