Often asked: When Evaluating A Make-or-buy Decision, Which Of The Following Does Not Need To Be Considered?

Which of the following items should not be considered when evaluating a make-or-buy decision?

Net book value (NBV) of the production equipment used to make the item in question does not have to be considered when evaluating a make-or-buy decision. Net book value (NBV) of the production equipment used is a Sunk cost or past cost and irrelevant is make-or-buy decision.

When evaluating a make − or − buy decision which of the following needs to be considered?

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

Which factors must be considered in make-or-buy decisions?

Factors Influencing Make or Buy Decision:

  • Volume of Production:
  • Cost Analysis:
  • Utilization of Production Capacity:
  • Integration of Production System:
  • Availability of Manpower:
  • Secrecy or Protection of Patent Right:
  • Fixed Cost:
  • Availability of competent suppliers or vendors.
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Which of the following costs 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.

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.

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.

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.

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.

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.

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What is the difference between quantitative and qualitative factors?

What is the difference between quantitative and qualitative data? Quantitative data can be counted, measured, and expressed using numbers. Qualitative data is descriptive and conceptual. Qualitative data can be categorized based on traits and characteristics.

What to consider when buying products?

5 Factors Consumers Consider When Choosing Your Product

  • Package Reusability. Consumers have always wanted more for their money, but modern consumers want environmental responsibility for their money, as well.
  • Product Allure. Make the product look good.
  • Familiarity.
  • Snobocity.
  • Brand Trustworthiness.

What are the purchasing methods?

There are five essential methods of purchasing:

  • Bulk Purchasing.
  • Hand to Mouth Purchasing.
  • Speculative Purchasing.
  • Blanket Purchasing.
  • Reciprocate Purchasing.

What is sell or process further?

The sell or process further decision is the choice of selling a product now or processing it further to earn additional revenue. This choice is based on an incremental analysis of whether the additional revenues to be gained will exceed the additional costs to be incurred as part of the additional processing work.

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.

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.

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