Often asked: What Should Be The Final Consideration In The Make-or-buy Decision Of A Product?

What are the consideration for a product make decision?

Make or buy decision is the production decision made by the company i.e whether to buy the product or to manufacture the product. The cost of buying and manufacturing are both taking into consideration while making the decision. Hence, the cost of production is considered for ‘make or buy’ decision.

What is the most important consideration 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.

When should the make-or-buy decision be made?

A make-or-buy decision refers to an act of using cost-benefit to make a strategic choice between manufacturing a product in-house or purchasing from an external supplier. It arises when a producing company faces a diminishing capacity, experiences problems with the current suppliers, or sees changing demand.

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Which cost is taken into consideration for make-or-buy decision?

The cost to buy an item should include -purchase price of the item or component, transportation cost, sales tax and octopi, procurement cost, carrying cost, receiving and incoming inspection costs. The analysis of these two costs helps take decision whether to make or buy.

Which of the following is a basic consideration in the value buying decision?

The personal factors include age, occupation, lifestyle, social and economic status and the gender of the consumer. These factors can individually or collectively affect the buying decisions of the consumers.

What do you 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.

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.

How is the problem of make or buy resolved?

A long term contract with a reliable supplier may solve this problem. (5) Can an alternative use be found for resources made idle by a decision to purchase from outside.

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.

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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.

When a product is past the split off point but is not yet a finished product it is called a n?

Intermediate Product. A product that is past the split off point, but is not yet a finished product.

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.

Which items are excluded from cost sheet?

Items Excluded from Cost Accounts

  • Items of Appropriation of Profit. (a) Income tax paid and legal expenses incurred in connection with the assessment of income tax. (b) Transfer to reserves.
  • Items of Pure Finance. (a) Interest and dividends received on investments.
  • Abnormal items. (a) Cost of abnormal idle time.

What factors should companies take into consideration when making the decision between developing their own applications?

Regardless of where you are in the process of developing or having already developed a custom application, consider these four key factors: technological necessities, the development/maintenance process, the ROI (Return on Investment), and the impact on staff (organizational change management considerations) in order

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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.

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