Why Fixed Costs Are Ignored In ‘make Or Buy’ Decisions?

1.	Why Fixed Costs Are Ignored In ‘make Or Buy’ Decisions?
Answer» Fixed COSTS are ALREADY incurred and so they do not influence the future ‘Make or Buy’ decisions. HENCE, they are ignored for comparison. Only variable costs, in both OPTIONS, are compared and that OPTION is chosen, where the variable costs are lower. Fixed costs are already incurred and so they do not influence the future ‘Make or Buy’ decisions. Hence, they are ignored for comparison. Only variable costs, in both options, are compared and that option is chosen, where the variable costs are lower.

Answer»

Fixed COSTS are ALREADY incurred and so they do not influence the future ‘Make or Buy’ decisions. HENCE, they are ignored for comparison. Only variable costs, in both OPTIONS, are compared and that OPTION is chosen, where the variable costs are lower.

Fixed costs are already incurred and so they do not influence the future ‘Make or Buy’ decisions. Hence, they are ignored for comparison. Only variable costs, in both options, are compared and that option is chosen, where the variable costs are lower.

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