- 1 What is not relevant in a make-or-buy decision?
- 2 Which of the following factors should be considered in a make-or-buy decision?
- 3 Which of the following costs are relevant to a make-or-buy decision?
- 4 What do you mean by make-or-buy decision?
- 5 Which of the following is an example of sunk cost?
- 6 Why make or buy decision is important?
- 7 When should a special order be accepted?
- 8 What are the aspects of cost control?
- 9 What is special order decision?
- 10 Which of the following costs are always irrelevant in decision making?
- 11 What are the advantages of decision making?
- 12 Why might a company make a product in house rather than buy it?
- 13 What is sell or process further?
- 14 Which of the following are relevant in short term decision making?
What is not relevant in a make-or-buy decision?
Make-or-buy decisions must be based on the relevant cost of each option. Relevant costs in make-or-buy decisions include all incremental cash flows. Any cost that does not change as a result of the decision should be ignored such as depreciation and indirect fixed costs.
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.
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 do you mean by 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 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.
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 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 is special order decision?
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.
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 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.
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.
Which of the following are relevant in short term decision making?
Which of the following are relevant in short-term decision making? Purchase price, reduction in variable costs, additional revenue and opportunity costs are relevant in short-term decision making.