>> Accounting Basics
A company is currently making a necessary component in house (the company is producing the component for its own use). The company has received an offer to buy the component from an outside supplier. A machine is being rented to make the component. If the company were to buy the component, the machine would no longer be rented. The rent on the machine, in relation to the decision to make or buy the component, is:
1-sunk and therefore not relevant.
2-avoidable and therefore not relevant.
3-avoidable and therefore relevant.
4-unavoidable and therefore relevant.