Question

A company has to decide whether to Make or Buy. Through differential cost
analysis, how will you ascertain the net difference between the two alternatives
so as to assist the management in their decision making? Use hypothetical
figures to illustrate

Answer 1

Answer:

Differential analysis is useful in this decision making because a company's income statement does not automatically associate costs with certain products, segments, or customers. Thus, companies must reclassify costs as those that the action would change and those that it would not change.