Multiple-choice. Choose the best answer.

a. In a make-or-buy decision:

(1) Only direct materials costs are relevant. (2) Fixed costs that can be avoided in the future are relevant to the decision. (3) Fixed costs that will not change regardless of the decision are relevant. (4) Only conversion costs are relevant.

b. In deciding whether to manufacture a part or buy it from an outside vendor, a cost that is irrelevant to the short-run decision is:

( 1 ) Direct labor. (2) Variable overhead. (3) Fixed overhead that will be avoided if the part is bought from an outside vendor. (4) Fixed overhead that will continue even if the part is bought from an outside vendor.

c. Production of a special order will increase operating profit when the additional revenue from the special order is greater than:

(1) The conversion costs incurred in producing the order. (2) The direct material costs in producing the order. (3) The fixed costs incurred in producing the order. (4) The indirect costs of producing the order. (5) The differential costs of producing the order.

d. In considering a special-order situation that will enable a company to make use of presently idle capacity, which of the following costs would probably not be differential?

(1) Materials. (2) Depreciation of buildings. (3) Direct labor. (4) Variable overhead.