Answered: What is the rent on the machine, in…

Business

Accounting

What is the rent on the machine, in relation to the decision to make or buy the component?

Financial Accounting Intro Concepts Meth/Uses

14th Edition

ISBN:9781285595047

Author:Weil

Publisher:Weil

Chapter10: Long-lived Tangible And Intangible Assets

Section: Chapter Questions

Problem 3Q

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Question

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Wilson is currently producing a component for one of its products. Wilson has received an offer to buy the component from an outside supplier. A machine is currently being rented to manufacture the component. If the company buys the component, the rental will be cancelled. What is the rent on the machine, in relation to the decision to make or buy the component?

Sunk and therefore not relevant
Avoidable and therefore not relevant
Avoidable and therefore relevant
Unavoidable and therefore relevant

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