Question 1: (8 marks) (A1, D1)

Part A: (3 marks)

Variable costs are relevant and fixed costs are irrelevant. Explain why you agree or disagree with this statement.

Part B: (5 marks)

Management is often faced with the alternative of continuing to make a product or component internally or going to an external source and purchasing the product or component. In gathering relevant information for these two alternatives, briefly identify the quantitative factors that should be considered. Are there any qualitative factors that should also be considered?