Question: Regarding The Decision To Make Or Buy A Part Or A Service, Which Of The Following Is False?

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.

What is make or buy decision in management accounting?

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 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.

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Can direct materials ever be irrelevant in a make or buy decision explain?

a. Direct materials can be irrelevant in a make-or-buy decision if they do not change from one choice to the next. An example of a fixed cost that is relevant would be a salaried worker.

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.

When to use make-or-buy decision?

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.

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 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.

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.
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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 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.

Should joint costs be considered in a sell or process further decision?

Joint costs are irrelevant for your “sell or process further” decision. Those costs are the same, whether you sell the product at splitoff or process further. In this case, joint costs are sunk or past costs.

Why is depreciation on an existing asset always irrelevant?

Depreciation on an existing asset represents an allocation of a past cost Past costs are never relevant. 6. Give an example of a future cost that is not relevant. A future cost that is not relevant is a future cost that does not differ across the alternatives beingconsidered.

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