Answer (A) is correct . Relevant costs are anticipated costs that will vary among the choices available. If two courses of action share some costs, those costs are not relevant because they will be incurred regardless of the decision made. Relevant costs include fixed costs that could be avoided if the items were purchased from an outsider.
Answer (B) is incorrect because Depreciation should not be considered unless it can be avoided.
Answer (C) is incorrect because Property taxes are not affected by the decision and are therefore not relevant unless the decision to buy leads to sale of the property.
Answer (D) is incorrect because Factory management costs are not affected by the decision and are therefore not relevant unless the decision to buy reduces the number of factory managers.
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