- 1 How do you analyze a make-or-buy decision?
- 2 Which cost analysis help the manufacturer to take make-or-buy decision?
- 3 Which of the following factors should be considered in a make-or-buy decision?
- 4 What is the first step to making a make-or-buy decision?
- 5 When should a special order be accepted?
- 6 Why make or buy decision is important?
- 7 When opportunity costs exist they are always relevant?
- 8 Why might a company make a product in-house rather than buy it?
- 9 Which of the following costs are always irrelevant in decision making?
- 10 What are the aspects of cost control?
- 11 Why is it often difficult to evaluate make or buy decisions?
- 12 What is meant by value analysis?
- 13 What are the major trade offs in a make or buy decision?
- 14 What is the difference between relevant and irrelevant costs?
How do you analyze a make-or-buy decision?
What Is a 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.
Which cost analysis help the manufacturer to take make-or-buy decision?
Cost Analysis: The cost analysis refers to the determination of costs to make an item as well as the cost to buy it.
Which of the following factors should be considered 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.
What is the first step to making a make-or-buy decision?
They proposed a make-or-buy decision process methodology through the following stages: planning, evaluation, internal costs, and performance analysis. Companies can perform their freight distribution in three different ways.
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.
Why make or buy decision is important?
Some of the advantages of making or buy decisions are as follows: The finding helps choose the most efficient option to go about in-house production of outsourcing. The decision helps in the strategic maneuver of the business. The decision helps save the cost for many businesses.
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.
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.
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 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.
Why is it often difficult to evaluate make or buy decisions?
Why is it often difficult to evaluate make -or- buy decisions? Most managers do not think it necessary to do so. What should be done if a make -or- buy analysis indicates two labor hours daily can be reduced with a convenience food product, and the decision is implemented because of money should be saved?
What is meant by value analysis?
Value analysis is an approach to improving the value of a product or process by understanding its constituent components and their associated costs. It then seeks to find improvements to the components by either reducing their cost or increasing the value of the functions.
What are the major trade offs in a make or buy decision?
Dabhilkar (2011) points out that there are trade-offs in ‘make or buy’ decision-making regarding their main reasons ( costs, quality, core activity focus, flexibility, and innovation ) that often conflict and imply that a company cannot have all these reasons when outsourcing an activity.
What is the difference between relevant and irrelevant costs?
Relevant costs are costs that will be affected by a managerial decision. 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.