FAQ: Which Of The Following Are Relevant In A Make Or Buy Decision?

Which of the following cost are relevant to a make or buy decision?

Examples of relevant costs in the context of a make or buy decision include direct labor, direct materials, variable overhead. Other costs that should be considered in this category are any incremental costs necessary for a part manufacturing.

Which of the following factors should be considered in a make or buy decision?

The two most important factors to consider in a make-or-buy decision are cost and the availability of production capacity.

Which of the following are relevant in short term decision making?

Which of the following are relevant in short-term decision making? Purchase price, reduction in variable costs, additional revenue and opportunity costs are relevant in short-term decision making.

Which of the following is an example of sunk cost?

A sunk cost refers to a cost that has already occurred and has no potential for recovery in the future. For example, your rent, marketing campaign expenses or money spent on new equipment can be considered sunk costs. A sunk cost can also be referred to as a past cost.

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When opportunity costs exist they are always relevant?

When opportunity costs exist, they are always relevant. When capacity is constrained, relevant costs equal incremental costs plus opportunity costs. If the $20,000 spent to purchase inventory could be invested an earn interest of $500, then the opportunity cost of holding inventory is $20,000.

Why make-or-buy decision is important?

Lower costs and higher capital investments One of the most notable advantages that a company enjoys when embracing a make-or-buy decision approach is that it can lower costs and increase capital investments, regardless of whether it decides to make materials in-house or subcontract from an external vendor.

When should a special order be accepted?

A special order generally should be accepted if: A) its revenue exceeds allocated fixed costs, regardless of the variable costs associated with the order.

What are the aspects of cost control?

Features of Cost control Cost control process involves setting targets and standards, ascertaining the actual performance, comparing the actual performance with standard, investigating the variances and taking corrective action.

Which of the costs mentioned in the following decision situations is relevant?

Which of the costs mentioned in the following decision situations is relevant? opportunity cost.

Which of the following costs are always irrelevant in decision making?

Sunk costs are those costs that happened and there is not one thing we can do about it. These costs are never relevant in our decision making process because they already happened! These costs are never a differential cost, meaning, they are always irrelevant.

What do u mean by make-or-buy decision?

A make-or-buy decision is an act of choosing between manufacturing a product in-house or purchasing it from an external supplier. Make-or-buy decisions, like outsourcing decisions, speak to a comparison of the costs and advantages of producing in-house versus buying it elsewhere.

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Why might a company make a product in house rather than buy it?

There are several reasons to manufacture in-house instead of outsourcing production. It gives your company a lot flexibility to alter the product as you produce it. In-house production ensures higher quality control. With production in-house, you can keep your overhead low by avoiding foreign managers.

What is special order decision?

Special-order decisions involve situations in which management must decide whether to accept unusual customer orders. These orders typically require special processing or involve a request for a low price.

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