Often asked: When Evaluating A Make−or−buy Decision, Which Of The Following Needs 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.

Which of the following costs is 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 would be an irrelevant cost?

Irrelevant costs are those that will not change in the future when you make one decision versus another. Examples of irrelevant costs are sunk costs, committed costs, or overheads as these cannot be avoided.

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Which of the following is an example of sunk cost quizlet?

The rent paid for an already existing facility is an example of a sunk cost. A cost may be relevant for one decision, but NOT relevant for a different decision.

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.

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.

What is a make 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.

What makes a cost relevant?

A relevant cost is a cost that only relates to a specific management decision, and which will change in the future as a result of that decision. The relevant cost concept is extremely useful for eliminating extraneous information from a particular decision-making process.

Which costs are irrelevant for decision making quizlet?

Avoidable costs are irrelevant costs in decisions. The book value of an old machine is always considered an opportunity cost in a decision. A cost that will be incurred regardless of which alternative is selected is not relevant when choosing between the alternatives.

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What is imputed cost with example?

Imputed cost is the cost incurred during the period when an asset is employed for a particular use, rather than redirecting the asset to a different use. This amount is the incremental difference between the two options. For example, a teacher decides to go back to school to earn a master’s degree.

Which of the following is a good 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.

What is correct about sunk cost quizlet?

(1) Sunk costs (A sunk cost is a cost that has already been incurred and cannot be avoided regardless of what a manager decides to do.) An opportunity cost is the benefit that is foregone as a result of pursuing some course of action. An opportunity cost is a relevant cost.

Which of the following is an example of outsourcing?

Some common outsourcing activities include: human resource management, facilities management, supply chain management, accounting, customer support and service, marketing, computer aided design, research, design, content writing, engineering, diagnostic services, and legal documentation.”

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