Often asked: When Evaluating A Make-or-buy Decision, Which Of The Following Needs To Be Considered?

What must be considered for a make vs buy decision?

In a make-or-buy decision, the most important factors to consider are part of quantitative analysis, such as the associated costs of production and whether the business can produce at required levels.

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.

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.

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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.

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.

What are qualitative factors?

Qualitative factors are decision outcomes that cannot be measured. Examples of qualitative factors are: Morale. The impact on employee morale of adding a break room to the production area.

What are the five stages of the buyer decision process?

5 Stages of the Consumer Buying Decision Process

  • Need Recognition. The buying decision process begins when a consumer realizes they have a need.
  • Information Search.
  • Option Evaluation.
  • Purchase Decision.
  • Post-Purchase Evaluation.

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 relevant costs for decision making?

Relevant cost is a managerial accounting term that describes avoidable costs that are incurred only when making specific business decisions. The concept of relevant cost is used to eliminate unnecessary data that could complicate the decision-making process.

What are special order decisions?

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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In what scenario would a special order be accepted?

The general rule is to accept a special order if the benefits exceed costs. Otherwise, turn down respectfully. If the business has excess capacity to fill the special order, it would accept if incremental sales revenue exceeds incremental variable costs.

What is the advantages of accepting special order?

That revenue allows you to cover fixed costs — like a building lease payment or insurance premiums. A special order can be filled only if you have excess capacity. You must have the ability to perform the work. Get ready for this: You can accept a lower sales price for a special order and still be profitable.

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