Often asked: In A Make Or Buy Decision Which Of The Following Is A Reason For Making An Item?

What are the reasons behind make-or-buy decisions?

MAKE-OR-BUY DECISIONS

  • Cost considerations (less expensive to make the part)
  • Desire to integrate plant operations.
  • Productive use of excess plant capacity to help absorb fixed overhead (using existing idle capacity)
  • Need to exert direct control over production and/or quality.
  • Better quality control.

What is a make-or-buy decision quizlet?

Make vs. Buy Decision. the act of deciding whether to produce an item internally or buy the item from an outside supplier. make. Producing (i.e., manufacturing) materials or products internally (i.e., in operations owned by the company).

What should be considered in a make-or-buy decision?

The make-or-buy decision requires thorough analysis from all angles. Quantitative factors to consider may include things such as the availability of production facilities, production capacity, and required resources. They may also include fixed and variable costs that can be determined with certainty or estimated.

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What is the first step to making a make-or-buy decision?

They proposed a make-or-buy decision process methodology through the following stages: planning, evaluation, internal costs, and performance analysis. Companies can perform their freight distribution in three different ways.

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 three factors that can be considered in the make or buy process?

The decision as to whether to make vs. buy a product is based on a variety of factors, including the cost of either option, whether the product is available from other vendors, the expertise and resources your business has when it comes to manufacturing, and whether you have enough cash in place to make a purchase.

Which of the following is a reason for outsourcing?

The biggest motivating reason for a company to outsource is to save money. There might be a problem with a supplier or a cost increase in materials and the company needs to reduce costs to stay competitive with its products. Another reason may be the need to downsize due to a merger or acquisition.

What are the relevant costs in a make-or-buy decision?

Relevant costs in make-or-buy decisions include all incremental cash flows. Any cost that does not change as a result of the decision should be ignored such as depreciation and indirect fixed costs.

Which of the following is a danger of vertical integration?

Below are disadvantages to vertical integration: Companies might get too big and mismanage the overall process. Outsourcing to suppliers and vendors might be more efficient if their expertise is superior. Costs of vertical integration such as purchasing a supplier can be significant.

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What is make buy decision explain with examples?

A Make or Buy Decision is a decision made to either manufacture a product/ service in house or buy it from outside suppliers (outsourcing) based on cost-benefit analysis.

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 are the advantages of decision making?

Advantages and Disadvantages of Decision Making

  • Gives more information.
  • Increase people’s participation.
  • Provide more alternatives.
  • Improves the degree of acceptance and commitment.
  • Improves the quality of decisions.
  • Helps in strengthening the organisation.

What are the major trade offs in a make or buy decision?

Dabhilkar (2011) points out that there are trade-offs in ‘make or buy’ decision-making regarding their main reasons ( costs, quality, core activity focus, flexibility, and innovation ) that often conflict and imply that a company cannot have all these reasons when outsourcing an activity.

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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